AM Best Affirms Credit Ratings of Protective Life Corporation and Its Key Subsidiaries

AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” (Superior) of the primary life insurance subsidiaries of Protective Life Corporation (headquartered in Birmingham, AL), collectively known as Protective Life. Additionally, AM Best has affirmed the Long-Term ICR of “a-” (Excellent) and the existing Long-Term Issue Credit Ratings (Long-Term IRs) of Protective Life Corporation. At the same time, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) of Protective Property & Casualty Insurance Corporation (Protective P&C) (St. Louis, MO) The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed list of these subsidiaries and ratings.)

The ratings of Protective Life reflect its balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

The ratings of Protective Life also reflect its trend of a very strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), favorable liquidity metrics and demonstrated financial support from its parent, Dai-ichi Life Holdings, Inc (Dai-ichi). Protective Life functions as the North America growth engine for Dai-ichi. While Protective Life’s balance sheet has equity and interest rate risk embedded in its variable annuity book, the group benefits from a comprehensive hedging program. Protective Life has moderate investment risk compared to the individual life benchmark, mitigated by strong financial flexibility. Financial and operating leverage at Protective Life remain within AM Best’s expectations.

The company’s operating results are strong, benefiting from consistent and diversified net income. Protective Life continues to demonstrate a well-established core competency as an acquirer of a diverse list of blocks of business, including life, annuity and asset protection blocks of business, which have been folded into the company and now contribute to earnings growth and allowed it to realize scale-related operating efficiencies.

Protective Life’s business profile benefits from diversity in its distribution channels and product lines, along with continued investments in innovation. The company’s ERM is appropriate for its risk profile, which benefits from embedded stress testing of a wide range of scenarios.

The ratings of Protective P&C reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. The ratings also reflect rating lift from its parent, Protective Life.

Protective P&C’s balance sheet strength assessment is supported by the strongest level of risk-adjusted capitalization, as measured by BCAR, good asset quality, adequate balance sheet liquidity and yearly organic surplus growth derived from earnings, which is partially offset by annual dividends to its parent. The balance sheet strength is somewhat diminished by Protective P&C’s extensive use of unrated dealer-owned reinsurance arrangements.

AM Best considers the company’s operating performance to be adequate based on its consistent track record of profitability. Return metrics and underwriting ratios are generally approximate to its composite peer group of warranty insurers. In recent years, Protective P&C’s operating performance has benefitted from favorable market dynamics such as elevated used car valuations and pricing; however, operating metrics are returning to more normal levels with the improvement in macroeconomic conditions.

Protective P&C specializes in providing coverage for vehicle service contracts and guaranteed asset protection products for automobiles, marine craft, power sport vehicles and recreational vehicles, which are sold primarily through franchise dealers and independent agents. The neutral business profile reflects the company’s concentration of underwriting risk in the highly competitive auto warranty market, offset by its geographic diversification. The company’s ERM is appropriate for its risk profile and is integrated with that of Protective Life.

Rating enhancement has been afforded to Protective P&C due to the implied support from its higher-rated parent, its integration into the organization and its support of the organization’s asset protection strategy.

The FSR of A+ (Superior) and the Long-Term ICRs of “aa-” (Superior) have been affirmed with a stable outlook for the following primary life insurance subsidiaries of Protective Life Corporation:

• Protective Life Insurance Company
• Protective Life and Annuity Insurance Company
• West Coast Life Insurance Company
• MONY Life Insurance Company

The following Long-Term IRs have been affirmed with stable outlook:

Protective Life Corporation-

— “a-” (Excellent) on $400 million 3.40% senior unsecured notes, due 2030

— “a-” (Excellent) on $300 million 8.45% senior unsecured notes, due 2039

Protective Life Global Funding - “aa-” (Superior) program rating

— “aa-” (Superior) on all outstanding notes issued under the program

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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