Protective Life Corp. (PL) filed Quarterly Report for the period ended 2009-09-30.
Protective Life Corp. is a holding company whose subsidiaries provide financial services through the production distribution and administration of insurance and investment products. The company operates seven divisions whose principal strategic focuses can be grouped into three general categories: life insurance specialty insurance products and retirement savings and investment products. Protective Life Corp. has a market cap of $1.35 billion; its shares were traded at around $15.8 with a P/E ratio of 4.5 and P/S ratio of 0.6. The dividend yield of Protective Life Corp. stocks is 3.1%. Protective Life Corp. had an annual average earning growth of 5.2% over the past 10 years.
Highlight of Business Operations:
The Company has sold credit default protection on liquid traded indices to enhance the return on its investment portfolio. These credit default swaps create credit exposure similar to an investment in publicly issued fixed maturity cash investments. Outstanding credit default swaps relate to the Investment Grade Series 9 Index and have terms to December 2017. Defaults within the Investment Grade Series 9 Index that exceeded the 10% attachment point would require the Company to perform under the credit default swaps, up to the 15% exhaustion point. The maximum potential amount of future payments (undiscounted) that the Company could be required to make under the credit derivatives is $25.0 million. As of September 30, 2009, the fair value of the credit derivatives was a liability of $2.7 million. As of September 30, 2009, the Company had collateral of $3.7 million posted with the counterparties to credit default swaps. The collateral is counterparty specific and is not tied to any one contract. If the credit default swaps needed to be settled immediately, the Company would not need to post an additional payment.
On October 9, 2009, the Company closed on offerings of $400 million of its senior notes due in 2019, $100 million of its senior notes due in 2024, and $300 million of its senior notes due in 2039, for an aggregate principal amount of $800 million. The Notes were offered and sold pursuant to Protective’s shelf registration statement on Form S-3.
The Company used the net proceeds from the offering of the Notes to purchase $800 million in aggregate principal amount of newly-issued surplus notes of one of its indirect wholly owned subsidiaries, Golden Gate Captive Insurance Company (“Golden Gate”). Golden Gate used a portion of the proceeds from the sale of the surplus notes to the Company to repurchase at a discount $800 million in aggregate principal amount of its outstanding Series A floating rate surplus notes that were held by third parties. This resulted in a $126 million pre-tax gain, net of deferred issue costs, that will be recognized in the fourth quarter of 2009.
On November 3, 2009, Lloyds Banking Group Plc. (“Lloyds”) and Royal Bank of Scotland Group Plc. (“RBS”) announced a series of proposed transactions to increase their core Tier 1 capital levels. These transactions primarily consist of rights offerings and exchanges/deferrals on certain hybrid securities. As of September 30, 2009, our hybrid holdings in Lloyds had a GAAP amortized cost of $64.1 million and a market value of $38.0 million. Additionally, our hybrid holdings in RBS had a GAAP amortized cost of $14.8 million and a market value of $7.4 million. These amounts include our Modco trading portfolio holdings which had a GAAP amortized cost of $7.8 million and a market value of $4.5 million.
PL is in the portfolios of Kenneth Fisher of Fisher Asset Management, LLC, Richard Pzena of Pzena Investment Management LLC.
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