A.M. Best Affirms A+ -Superior- Rating Of Protective Life Insurance Co.

OLDWICK, N.J.--(BUSINESS WIRE)--June 24, 1999--

A.M. Best Co. today affirmed the A+ (Superior) rating of the Protective Life Insurance Co., Birmingham, Ala.

The rating of Protective Life reflects its superior capitalization, consistent growth in earnings, diversified revenue and profit sources and solid investment performance. The rating also acknowledges the broad distribution networks the company has developed and its continued success in integrating small to moderate sized companies and blocks of business, which are largely designed to augment internal growth by building critical mass in its various business segments.

While these competencies have led to a strong and diverse business profile, the favorable considerations are offset by the relative size of some its businesses and the company's reliance on products that are becoming more commoditized, which subjects the company to increasing competition. Additionally, the company has modified its acquisition strategy in recent years, to include larger companies and to maintain the acquired entity's distribution infrastructure. While A.M. Best notes that these more recent acquisitions have somewhat constrained the corporation's financial flexibility, the company continues to maintain superior risk-adjusted capitalization.

Although Protective Life maintains revenue and earnings streams that are diversified by distribution source and by product segment, a significant portion of GAAP and statutory earnings continue to be generated by its acquisition and guaranteed investment contracts divisions, which specialize in the administration of run-off businesses and in the underwriting of guaranteed investment contracts. Despite the company's demonstrated competencies in these areas, A.M. Best believes both of these operations to be somewhat opportunistic, particularly in the current environment; therefore, earnings growth from these divisions may be constrained in the future. Nonetheless, these two businesses have contributed to strong top-line and bottom-line growth.

A.M. Best also believes that Protective Life has positioned its various other business segments well. Solid growth in new business and earnings should continue as the company leverages its strong distribution relationships and operating fundamentals. Statutory earnings have been consistently favorable with considerable improvement experienced between 1995 and 1998. This improvement is primarily due to the integration of purchased blocks of businesses, growth in its group indemnity and prepaid dental plans, a successful investment strategy and disciplined asset/liability management that supports its individual and group annuity businesses.

A high quality, well-diversified investment portfolio supports Protective Life's solid investment performance. The investment portfolio principally consists of three asset classes that include investment grade corporate bonds, mortgage-backed securities (MBS), and commercial mortgages (CM). The company strives to maintain a conservative investment strategy that maintains high liquidity and delivers attractive investment returns. Although the company maintains an above average exposure to MBS and CM, these asset classes are effectively managed and focused on a specialized market segment. Protective Life has a conservative, well-developed asset-liability-matching program. The program, which is aggressively monitored, uses a high degree of precision in its segmentation strategy that results in a well-managed risk profile in each operating division. The company's success in managing its investment portfolio is based upon strict underwriting standards, constant monitoring, and the use of technology. A.M. Best believes that these competencies provide the company with a sound risk-management program.

In addition, A.M. Best upgraded the insurance ratings of the following companies--all subsidiaries within the parent company of the Protective Life Corp.: Protective Life & Annuity Insurance Co., A (Excellent) to A+, West Coast Life Insurance Co., A to A+ and Western Diversified Casualty Insurance Co., B++ (Very Good) to A-.

A.M. Best also affirmed the insurance letter ratings of these Protective Life Corp. subsidiaries: Empire General Life Assurance Corp., A+, Wisconsin National Life Insurance Co., A, and Western Diversified Life Insurance Co., at A-; as well as the financial performance ratings of Capital Investors Life Insurance Co., at FPR 5 (Good) and Citizens Accident and Health Insurance Co., at FPR 4 (Fair). Subsidiaries, Protective Life Insurance Co. of Ohio and Protective Life Insurance Co. of Kentucky, are rated NR-3 (rating procedure inapplicable).

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