Fitch Lowers Protective Life As Part of Industry Review

Business Wire, Sept 19, 2002

Business Editors

CHICAGO--(BUSINESS WIRE)--Sept. 19, 2002

Fitch Ratings has lowered the ratings of Protective Life Insurance Company (Protective Life) and its wholly owned subsidiaries (Protective) as part of a comprehensive industry review of all North American life insurance company ratings that was initiated on August 14, 2002, and completed today. The ratings affected by today's actions are the insurer financial strength ratings of Protective, which were lowered to 'AA-' from 'AA', the senior debt of Protective Life Corporation, which was lowered to 'A-' from 'A ' and the trust preferred securities of PLC Capital Trust I and III, which were lowered to 'BBB ' from 'A'. Protective represents one of 35 life insurance groups, making up approximately 42% of Fitch's ratings universe, that had ratings lowered as a result of the review. The Rating Outlook for all ratings is Stable.

The industry review was the result of Fitch's belief that recent adverse performance within the investment markets required an accelerated recognition of certain industry trends that have been negatively impacting life insurers for some time. These trends, specifically unfavorable competitive pressures and product portfolio migration, have been inherent in Fitch's long-standing Negative Rating Outlook on the industry and, as a result of the review, have been fully considered into ratings generally. The review led to the establishment of higher standards for each rating category in many quantitative and qualitative areas of analysis.

Rating changes at the company level involved a reassessment of each insurer's fundamental characteristics relative to Fitch's new ratings standards. This included a review of the company's product risk profile and fundamental competitive and operating characteristics, and a review of the company's capital position (risk-based capital ratios, financial leverage and capital size), among numerous other factors. Fitch also looked closely at recent and anticipated investment performance under current adverse capital markets conditions.

The rating action on Protective's IFS ratings was driven primarily by Fitch's enhanced criteria for all insurer financial strength ratings including well established business position in either a major market, or leadership positions in several well defined niche markets, and clear competitive advantages in core businesses. The IFS rating action was also driven by Fitch's reassessment of product risk within the industry, with higher risk recognition for stable value and annuity products. The rating action on Protective's fixed income ratings was driven by Fitch's notching standards from the lower IFS rating.

The ratings also reflect Protective's high quality, liquid investment portfolio that continues to produce excellent results during the current difficult credit environment; strong, stable operating earnings; demonstrated ability to enter new markets, expand and diversify distribution and build niche businesses; sound asset liability management enhanced by lower risk product design and strict pricing discipline for stable value products and acquisitions; consistent capital growth; and conservative senior management focused on profitable growth using moderate financial leverage.

Entity/Issue/Type                 Action       Rating/Outlook

Protective Life Insurance Company
  --Insurer financial strength    Lowered      'AA-'/Stable.

Protective Life and Annuity Insurance Company
  --Insurer financial strength    Lowered      'AA-'/Stable.

Empire General Life Assurance Company
  --Insurer financial strength    Lowered      'AA-'/Stable.

West Coast Life Insurance Company
  --Insurer financial strength    Lowered      'AA-'/Stable.

Protective Life Corporation
  --Senior debt                   Lowered      'A-'/Stable.

PLC Capital Trust I
  --Trust preferred securities    Lowered      'BBB '/Stable.

PLC Capital Trust III
 --Trust preferred securities     Lowered      'BBB '/Stable.