(The following statement was released by the rating agency)
NEW YORK, December 19 (Fitch) Fitch Ratings has affirmed
Protective Life Corp.'s
(NYSE: PL) Issuer Default Rating (IDR) at 'BBB+' and senior debt
'BBB'. At the same time, Fitch has affirmed the 'A' Insurer
(IFS) ratings of PL's primary life insurance subsidiaries. The
Rating Outlook is
Stable. A full ratings list follows at the end of this release.
KEY RATING DRIVERS:
PL's ratings continue to reflect the group's diversified
strong operating performance, solid debt service capability and
risk-adjusted capitalization. The company's financial leverage
ratio is in line
with rating expectations, but total leverage is high driven by
Fitch views PL's operating results as good and in line with
expectations for the
rating. PL's operating return on equity based on Fitch's
calculation is expected
to be about 11% for the full year 2013 compared to 10% in 2012.
Results in the
first nine months of 2013 were driven by improvement in the
Value, and Asset Protection segments, partially offset by less
mortality in the Life Marketing and Acquisitions segments. The
MONY Life Ins. Co. and business of MONY Life of America closed
Oct. 1 and is
expected to add about $20 million to full-year 2013 earnings
Fitch views PL's debt service capability as strong. Fitch
expects GAAP interest
coverage in 2013 to be in the 10x range, which is above rating
Cash interest coverage, which considers maximum statutory
dividend capacity and
committed cash at the holding company relative to adjusted
interest expense, is
very strong at about 10x.
Protective estimates the NAIC risk-based capital (RBC) ratio of
Insurance Company, the group's primary operating company, was
about 550% as of
Sept. 30, 2013, compared with 510% at year-end 2012. The RBC is
expected to be
in the 400% range for full-year 2013, reflecting the close of
the $1 billion
MONY acquisition in the fourth quarter.
PL's financial leverage ratio (FLR) is in line with rating
expectations at 28%
at Sept. 30, 2013, compared to 29% at year-end 2012. Fitch
notes, however, that
the FLR excludes reserve funding arrangements, which are
included in Fitch's
total financings and commitments (TFC) ratio. Fitch views PL's
TFC as high
relative to peers at 1.7x as of Sept. 30, 2013, but generally
views PL's reserve
financing activities as well-managed.
Key concerns include macroeconomic headwinds from low interest
rates and the
weak economic recovery. These conditions are expected to
constrain PL's ability
to improve earnings over the near term and could have a material
on the company's earnings and capital in a severe, albeit
The key rating triggers that could result in an upgrade include
coverage above 9x, operating return on equity (ROE) sustained in
the 11% to 12%
range; financial leverage below 25%, and TFC below 1.0x.
The key rating triggers that could result in a downgrade
leverage above 30%; reported RBC below 300%, a downturn or weak
earnings, or a material reinsurance loss. Ratings could also be
interest coverage falls below 5x or the TFC rises above 2.0x on
Fitch has affirmed the following ratings with a Stable Rating
Protective Life Corporation
--IDR at 'BBB+';
--$150 million in senior notes due 2014 at 'BBB';
--$150 million in senior notes due 2018 at 'BBB';
--$400 million of 7.38% senior notes due 2019 at 'BBB';
--$300 million of 8.45% senior notes due 2039 at 'BBB';
--$100 million of 8.00% senior retail notes due 2024 at 'BBB';
--$288 million of 6.25% subordinated debt due 2042' at 'BB+';
--$150 million of 6.00% subordinated debt due 2042 at 'BB+';
--$103 million of 6.13% trust-preferreds issued through PLC
Capital Trust V due 2034 at 'BB+'.
Protective Life Insurance Company
Protective Life and Annuity Insurance Company
West Coast Life Insurance Company
MONY Life Insurance Co.
--IFS at 'A'.
Protective Life Secured Trust
--Medium-term notes at 'A'.
Cynthia J. Crosson
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
Douglas L. Meyer, CFA
Douglas M. Pawlowski, CFA
Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549,
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--Insurance Rating Methodology' (November 2013).
Applicable Criteria and Related Research:
Insurance Rating Methodology -- Amended
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