Fitch Ratings has affirmed the 'A+' insurer financial strength (IFS) ratings of Protective Life Corporation's (PL) primary life insurance subsidiaries. In addition, Fitch has affirmed PL's long-term issuer default rating (IDR) at 'A-', senior debt ratings at 'BBB+' and subordinated debt ratings at 'BBB-'. The rating outlook is stable. The ratings were affirmed because PL continues to perform largely within rating expectations, according to Fitch. It noted: “Capitalisation remained strong through the pandemic, though full-year 2020 operating earnings were unfavourably affected by coronavirus-related mortality, low interest rates and captive consolidation expenses offset by favourable post-acquisition settlements, lower operating expenses and higher than expected investment income.” The affirmation also follows the recent affirmation of PL's parent company, Dai-ichi Life Holdings (Dai-ichi) with a stable rating outlook. PL's ratings reflect its status as a wholly owned subsidiary of Japan-based Dai-ichi. Fitch classifies PL as a “very important” subsidiary within Dai-ichi and, as such, the PL entities have been assigned the group's 'A+' IFS rating. As a wholly owned subsidiary of Dai-ichi, PL derives significant financial flexibility from its parent. Most of PL's debt is long-dated, and the next debt principal payment is not due until 2024. Fitch says: “PL has contingent financing in the form of an available credit facility and memberships in the Federal Home Loan Bank (FHLB) of Cincinnati, the FHLB of Atlanta and the FHLB of New York. PL also has a $1 billion credit facility, with $810 million available at year end 2020.” The rating firm also views PL's standalone credit profile (SCP) as in line with an 'A' IFS rating, which reflects the company's moderate business profile, strong balance sheet fundamentals based on PL's solid risk-based capitalisation, and above-average exposure to reserve funding arrangements. The ratings also reflect strong earnings, solid debt service capability and relatively low investment risk. Fitch suggests that PL's capitalisation as strong based on its Prism capital model score of “very strong” at its lead operating subsidiary, Protective Life Insurance Company (PLICO), whose RBC ratio was 490 per cent at 31 December 2020. PLICO's RBC ratio benefits from the use of a captive reinsurance arrangement that uses an excess of loss reinsurance to finance term and universal life insurance reserves. PL's financial leverage of 24 per cent at 31 December 2020 is moderate and in line with rating expectations.
