UPDATE: J.P. Morgan Reiterates Neutral Rating, Raises PT on Protective Life

In a report published Wednesday, J.P. Morgan & Co. reiterated its Neutral rating on Protective Life PL, and raised its price target from $25.00 to $28.00. J.P. Morgan noted, “In our view, PL's mixed business trends, high exposure to low interest rates, and valuation premium will limit upside in the stock. We project PL to generate robust flows in its annuity business (helped by growth in the VA product) and healthy sales growth in the asset protection division (driven by the vehicle service contract line). Also, the Liberty Life and UILIC deals should bolster earnings in the acquisition segment. On the other hand, we expect life marketing results to be marked by low margins, weak production, and high claims volatility. In addition, we expect sales and earnings in the stable value business to be pressured by low interest rates. While steady share buybacks should help supplement slow growth in operating income in the near term, we are wary that sustained low rates could drive reductions in EPS estimates over time. PL derives almost 85% of its earnings from interest rate sensitive businesses, significantly more than peers. Furthermore, we feel PL's valuation premium to the life sector is unwarranted given its below-average returns.” Protective Life closed on Tuesday at $29.70.