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Flashback: Crisis, Recovery, Acquisition

Protective Life CEO Johnny Johns at the 2009 annual meeting.

Protective Life CEO Johnny Johns at the 2009 annual meeting.

Photo by Jay Sailors

The recession of 2008 struck banks the hardest, but insurance companies fared not much better. Before it was over, a lot of insurance companies — including Birmingham-based Protective Life Corp. — seemed to be wishing they were banks. 

“In 2008, Protective faced some of the most challenging and difficult economic circumstances in our history,” Protective CEO Johnny Johns told shareholders in his annual address that February.

In our May 2009 issue of Business Alabama, we summed up the troubles at Protective, which was Alabama’s second largest non-bank public company in 2008, with revenues of $2.5 billion.

A $467.8 million loss in the company’s investment portfolio for 2008 was the major blow that took the company to a loss of $41.85 million for the year, compared with net income in 2007 of $289.56 million.

Protective stock had been trading in the $35 to $50 per share range since 2004 before nose-diving below $10 in September 2008.

So capital poor was Protective, management considered buying a bank in order to qualify for Troubled Asset Relief Program (TARP) money, making it one of 12 life insurers, including Hartford and Prudential, that applied for TARP funds. But none of them ever got the nod from federal regulators — even though the industry’s largest, American International Group, was deemed too big to fail and got $182.5 billion in bailout help.

Since that low point, Protective has used solid fundamentals to reclaim its historic heights. The stock reached just under $25 a share in 2010 and 2011, then steadily rose to more than $52 in 2014, when it attracted an offer it couldn’t refuse.

Japanese Dai-ichi Life Insurance Co. offered Protective shareholders $70 per share, a 35 percent premium on the trading price — topping the 25 percent premium Japan’s Suntory paid for Jim Beam. 

The $5.7 billion cash deal closed in February, making Protective a wholly owned, Birmingham-based subsidiary of what is now the world’s 13th largest insurance company, with assets of $424 billion.

The Protective acquisition was one of the first in what has become a shopping spree of big acquisitions by Japanese companies. Growth by acquisition is their strategy to overcome population loss at home. 

Chris McFadyen is the editorial director of Business Alabama.

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