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Rating Action on Protective Life

PL RGA

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Fitch Ratings Inc. affirmed its commercial mortgage-backed securities (“CMBS”) primary servicer rating of 'CPS3+', master servicer rating of 'CMS3', and special servicer rating of 'CSS3+' on Protective Life Insurance Company, an operating subsidiary of Protective Life Corporation (PL - Analyst Report). The ratings take into account the agency’s assessment of the company's seasoned and tenured management team and stable servicing platform.

The primary servicer rating affirmations came on the back of the company’s ability to service loans especially the CMBS-related transactions. The master servicer rating was backed by the subsidiary’s efficiency in examining correspondence and the overall liquidity position of the parent company. Protective Life reported a cash balance of $219.88 million as on June 30.

Finally, the special servicer rating was affirmed on the basis the company’s management skills and capability, manifested in its managing of its non-performing commercial real estate loans.

Protective Life’s servicing portfolio included 2,057 loans at second quarter end with an outstanding principal balance amounting to $5.2 billion. Of this, 263 loans were CMBS whose total worth was $808.8 million.

The company, as on June 30 had seven special servicer loans, two of which were CMBS loans. The principal balance still remaining unpaid on the CMBS loans, amounted to $7 million. Protective Life, as on that date, was specially servicing 13 real estate owned (REO) properties, one of which came under CMBS worth $0.5 million.

In a separate development, Moody’s Investor Services assigned its subordinated debt rating of Baa3 (hyb) on the company with a stable outlook, Reuters reported. Total debt in the books of the company as on June 30 was $1.51 billion, crawling up 1% over the prior-year quarter.

Rating affirmations or upgrades from credit rating agencies play an important part in retaining investor confidence in the stock as well as maintaining creditworthiness in the market. The company scores strongly with the rating agencies. We believe, strong ratings scores will help retain investor confidence and help it write more businesses going forward, thereby augmenting the results.

Protective Life’s peer, Reinsurance Group of America Inc. (RGA - Analyst Report) also received ratings from A.M. Best Co. They affirmed a debt rating of "bbb+" with a stable outlook. The rating follows the company’s recent issue of 6.2% fixed-to-floating subordinated debentures worth $400 million, slated to mature in 2042.

Protective Life carries a Zacks #3 Rank that translates into a short-term Hold rating. Its peer, Reinsurance Group also shares the same Zacks #3 Rank with the company.

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