A.M. Best Assigns Rating to FLAC Holdings, LLC's Insured Notes

Business Wire, Dec 15, 2006

OLDWICK, N.J. -- A.M. Best Co. has assigned a debt rating of "aaa" to the $134 million floating rate insured notes (notes) due December 15, 2018, issued by FLAC Holdings, LLC (FLAC Holdings) (New York NY). The rating outlook is stable.

FLAC Holdings was formed as a Delaware limited liability company in May 2004 for the limited purposes of acquiring and owning stock of Forethought Life Assurance Company (FLAC), which acquired a defined block of existing in-force pre-need insurance policies from Forethought Life Insurance Company (FLIC), issuing existing notes to support the acquisition of the in-force business and engaging in other activities incidental to the servicing and operation of the defined block of policies. In December 2006, FLAC Holdings and FLIC amended its reinsurance agreement to allow the inclusion to the existing defined block of policies of FLIC's new pre-need business written in 2004 and 2005 and in-force as of January 1, 2006. In addition, FLAC Holdings amended its limited liability company (LLC) agreement to permit the issuance of new notes.

FLAC Holdings will use approximately $131 million of the proceeds to redeem existing notes and pay transaction related expenses. Refinements made in the securitization structure will result in Forethought National Life Insurance Company (FNLIC), the parent of FLAC Holdings, receiving a dividend of approximately $82.5 million from FLAC Holdings. The dividend will be used by FNLIC for general corporate purposes.

The notes will be senior secured indebtedness of FLAC Holdings and represent a securitization of future distributable cash flows from a defined block of in-force pre-need insurance policies. Servicing of the notes (i.e. timely payment of interest and the ultimate repayment of principal and other amounts) is solely the responsibility of FLAC Holdings and is recourse only to the collateral and other assets, if any, of FLAC Holdings. The ability to service its obligations under the notes is primarily dependent upon FLAC's ability to dividend excess operating funds to FLAC Holdings. The ability of FLAC to dividend excess funds is highly dependent on the performance of the defined block of pre-need insurance policies. XL Capital Assurance Inc. (XLCA), a financial guarantor company, will insure, through the issuance of a financial guarantor insurance policy, the timely payment of scheduled interest and the repayment of principal to the note holders.

A.M. Best's assigned debt rating of "aaa" takes into consideration the following: an analysis of the underlying deal model cash flow projections including stress testing based upon A.M. Best's view on certain key variables including mortality/death rates, interest rate and investment conditions; a review of the structure, legal documentation and regulatory environment; a review of the actuarial assumptions and assessment of the underlying cash flow projections; and the assessment of the payment assurance of XLCA for the benefit of the note holders.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.