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Protective Life Q2 Earnings Beat on Better Segmental Results

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Protective Life Corp. reported second-quarter 2014 net operating earnings of $1.31 per share, surpassing the Zacks Consensus Estimate by 9.2%. Earnings improved 36% year over year on better performance across most of the segments, but were dampened somewhat by weak results at the Stable Value Products.


Including realized investment gains and related amortization on investment of 60 cents and realized investment loss and related amortization on derivatives of 58 cents, net income of Protective Life increased 4.7% year over year to $1.33 in the quarter.

Total revenue of Protective Life grossed $1.2 billion, up 20.8% year over year on higher net premium and policy fess (up 39% year over year) and net investment income (up 18%). Reported revenues also outperformed the Zacks Consensus Estimate of $1.1 billion.
Total benefits and expenses of Protective Life increased 24% year over year to $993 million on higher benefits and settlement expenses and higher operating expenses.
Segment Details
Life Marketing reported pre-tax operating income of $26.3 million, up 6.5% year over year on higher investment income partially offset by less favorable mortality and higher operating expenses partially offset by less favorable mortality and higher operating expenses. Sales came in at $32.8 million, down 26% year over year.
Pre-tax operating income of Acquisitions was $64.9 million, more than double year over year. The growth was mainly fueled by MONY Life Insurance Company, which contributed $31.2 million to operating earnings.

Annuities pre-tax operating income surged 52% year over year to $55.3 million. Sales dropped 49% year over year to $440.9 million.
Lower participating mortgage income and a decline in average account values resulted in a 12% year-over-year decline in pre-tax operating income at Stable Value to $17.3 million. The segment’s sales dropped to $50 million from $250.3 million in the year-ago quarter.
Asset Protection reported pre-tax operating income of $8.5 million, up 14.7% year over year. The increase was prompted by higher service contract earnings as well as higher credit insurance earnings. Sales increased 2.5% year over year to $126.5 million.
Corporate & Other pre-tax operating loss was $12.6 million, wider than $2.5 million loss incurred in the year-ago quarter.

Takeover By Dai-ichi Life Co.
In June, Protective Life announced its takeover by the Japanese life insurer Dai-ichi Life Co. for $5.7 billion. The transaction is expected to be completed in late 2014 or early 2015. The takeover will provide immense diversification benefits, helping it to transform from a national to an international player courtesy of being a wholly owned subsidiary of the one of the largest insurers in Japan.

This transaction will also enable Protective Life to deliver substantial, immediate cash value to its shareholders and sustain growth.  Moreover, Protective Life will be part of the thirteenth largest global insurer which Dai-ichi Life will transform to, post acquisition. Consequently, courtesy of its takeover, Protective Life will rise in rank from a medium to a large-size U.S. insurer.

Zacks Rank
Protective Life presently carries a Zacks Rank #3 (Hold).
Performance of Other Life Insurers
While Lincoln National Corp. (LNC - Free Report) outperformed the Zacks Consensus Estimate on higher revenues, Reinsurance Group of America Inc. (RGA - Free Report) surpassed the same on strong international earnings. However, StanCorp Financial Group Inc. missed the estimate on a less favorable claims experience in Employee Benefits and Individual Disability.

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