A.M. Best Co. has commented that the ratings of Protective Life Corporation (Protective) (NYSE: PL) and its primary life subsidiary, Protective Life Insurance Company (PLIC) (both headquartered in Birmingham, AL), are unchanged following Protective’s recent announcement that it has reached a definitive agreement with certain subsidiaries of AXA S.A. (AXA) to acquire MONY Life Insurance Company (MONY) (New York, NY) and to coinsure a significant block of business of MONY’s subsidiary, MONY Life Insurance Company of America (MLOA) (Phoenix, AZ).
The proposed all-cash deal represents an aggregate purchase price of approximately $1.0 billion and includes the stock purchase of MONY and the coinsurance of part of the book of business of MLOA. MLOA will continue to operate as a subsidiary of AXA. Protective will utilize only a modest amount of debt to fund the purchase, maintaining its financial leverage in the 30% range (incorporating some equity credit for existing hybrids). The majority of the financing will be sourced from excess capital at PLIC, supplemented by a Regulation XXX reserve solution. Although regulatory capital will decline at PLIC, A.M. Best believes the transaction itself will not have a significant impact on the long-term financial strength of the organization.
The acquisition of MONY and MLOA’s businesses, which generally comprises well-seasoned ordinary life business with little interest sensitivity and limited guarantees, is consistent with Protective’s core competency of acquiring and successful integrating closed blocks of business to augment earnings. A.M. Best recognizes there is execution risk with nearly every transaction, and this acquisition is Protective’s largest one to date in terms of assets to be purchased. Consequently, A.M. Best will review Protective’s integration plans along with the impact on its risk-adjusted capital and operating results once the acquisition closes, which is anticipated in the second half of 2013.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at http://www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
Michael Adams, 908-439-2200, ext. 5133
Senior Financial Analyst
William Pargeans, 908-439-2200, ext. 5359
Assistant Vice President
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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