Moody’s upgrades Protective Life

Moody's Investors Service said it upgraded Protective Life Corp.’s senior debt to Baa1 from Baa2, subordinated debt to Baa2(hyb) from Baa3(hyb) and junior subordinated debt to Baa3 (hyb) from Ba1(hyb) and the backed preferred stock of PLC Capital Trusts III, IV and V to Baa2(hyb) from Baa3(hyb). The backed senior secured debt of Protective Life Secured Trusts was affirmed at A2. These actions conclude the review for upgrade that was announced on June 4, 2014, and the outlook is stable.

The upgrade follows the closing of Dai-ichi Life Insurance Co.'s acquisition of all the outstanding stock of Protective for $5.7 billion of cash on Feb. 1. Dai-ichi is rated A1 with a stable outlook.

"The upgrade of Protective's holding company ratings is driven by the acquirer being a much higher rated company and our expectation that Dai-ichi would likely provide some level of support to Protective's creditors to protect its $5.7 billion investment,” Moody's senior vice president Scott Robinson said in an agency news release.

The agency added that the A2 insurance financial strength ratings and debt ratings of Protective's operating companies, including Protective Life Insurance Co., were affirmed because Moody's expects Protective's business strategy and risk profile to remain essentially unchanged and the current management team tol remain in place.

Protective's ratings reflect its diverse revenue and earnings sources, good market presence in domestic life insurance business, multiple distribution channels and an established core competency in acquiring other companies and blocks of business and managing them on a cost-efficient basis, Moody’s said.

Protective's credit challenges include moderate financial leverage at the Protective level, significant reinsurance counterparty risk and potential strains on capital due to Regulation XXX/AXXX reserves, managing the risks of policyholder guarantees associated with the growing variable annuity block and managing balances in its IIP business, the agency said.

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