Protective Life Corp. quadrupled sales of stable value products in the second quarter, but changes in the value of the derivatives used in a risk-control program dinged its profits.[@@]
Protective, Birmingham, Ala., is reporting $48 million in net income for the latest quarter on $486 million in revenue, compared with $62 million in net income on $482 million in revenue for the second quarter of 2004.
Protective uses derivatives contracts to hedge mortgage loan commitments. Low interest rates forced Protective to cut the estimated value of the contracts by $26 million, and that cut hurt net income by reducing revenue by about $26 million. During the second quarter of 2004, an increase in the estimated value of the contracts added $8.7 million to Protective’s revenue, the company says.