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We are reiterating our Neutral recommendation on the shares of Protective Life Corp. (PL - Analyst Report), following the release of fourth quarter earnings. This life insurer with a Zacks Rank #3 (Hold) reported a solid fourth quarter which included 11.4% positive earnings surprise. 
 
Why Reiterate?
 
Protective Life has been changing its sales mix to improve life insurance margins and reduce interest rate exposure. Thus it significantly increased its business in short-guarantee universal life product, which was less costly to underwrite and more mortality driven. Management therefore expects short-guarantee universal life to constitute a higher proportion of life sales going forward. 
 
Despite increasing competition, we expect Protective Life to benefit from the changing demographic pattern of America where a large proportion of the population is aging; creating a greater demand for retirement savings products.  We expect this trend will drive strong earnings growth in this business, given that the Protective Life is already witnessing strong variable annuity sales and increased premiums.
 
Protective has a long history of successfully acquiring both closed blocks of business and small companies. It has been traditionally successful in generating operating efficiencies along with increasing business scale via these acquisitions. Going forward we expect more such deals to be sealed by the company, given sufficient cash in hand.
 
However, Protective’s Life marketing businesses is expected to remain under pressure throughout 2013, due to headwinds from low interest rates and slow sales growth from price rise instituted by the company. Other players that continue to face headwinds from low interest rates include Prudential Inc. (PRU - Analyst Report) and MetLife Inc. (MET - Analyst Report). 
 
Moreover, in the Protective’s Life insurance segment, marketing margins have steadily compressed over the past few years due to higher reserve funding costs, and we do not foresee material expansion from current levels.
 
Following the earnings release, 5 of 11 estimates were revised pushing the Zacks Consensus Estimate for 2013 by 0.5% to $3.80 per share. 
 
Other Stocks to consider
 
Life insurer Reinsurance Group of America Inc. (RGA - Analyst Report), among others, carry a favorable Zacks Rank #2 (Buy).

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