A.M. Best Assigns 'a+' Rating to Protective Life's Floating Rate Senior Notes.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--Feb. 26, 2001

A.M. Best Co. has assigned an "a+" rating to $100 million of two-year floating rate (quarterly LIBOR plus .375%) senior notes issued by Protective Life Corp. (NYSE: PL) and affirmed the ratings on the company's existing debt securities. The issuance was made under Protective's $500 million shelf registration that was previously filed with the Securities & Exchange Commission. The financial strength ratings on Protective's life/health and property/casualty insurance subsidiaries remain unchanged.

The majority of the proceeds from the $100 million issue will be used to replace short-term financing incurred in connection with the recent acquisition of Standard Insurance Company's individual life business. The remaining portion of the proceeds will be used for general corporate purposes, affording Protective additional financial flexibility in the future. With the recent conversion of $115 million in FELINE PRIDES, Protective's financial leverage--total debt plus preferred securities--drops below 30%. A.M. Best expects the company's debt-to-capital ratio to remain under 30% in the near to medium term. In addition, A.M. Best believes Protective's future earnings will provide strong debt service coverage, and it anticipates capitalization to remain fairly constant even though Protective actively acquires blocks of business and insurance companies through a separate division established for this purpose.

The ratings reflect the company's diverse earnings sources and strong operating performance in all business lines. This consistent profitability is a result of Protective's well-managed growth strategy that is executed by an effective management team. The company continues to enhance operating efficiency through use of advanced technology, a decentralized organizational structure and a diversified network of non-captive distribution channels to market its products.

A.M. Best notes that Protective's risk management efforts are driven by an effective asset/liability duration matching program. The company utilizes a conservative approach by instituting significant call and surrender provisions in almost all of its contracts, significantly reducing its earnings volatility. The maturity of Protective's primary businesses in their respective product life cycles generates seasoned profit margins that further support stable earnings.

Offsetting these strengths is Protective's lack of scale in most of its businesses. However, this scale issue is largely mitigated by the group's low-cost administrative structure supported by its effective use of technology. In addition, the group's statutory capitalization--statutory surplus to total assets--is below its peer group's average due to its history of sales growth primarily in general account products that require a significant outlay of capital.

Approximately half of Protective's invested assets are in mortgage-related investments. A.M. Best believes the prepayment risks inherent in these interest-sensitive investments expose the company to earnings volatility; however, Protective's prudent underwriting strategy and refined asset/liability management procedures have thus far mitigated this volatility.

Protective Life Corp. is a diversified financial services holding company headquartered in Birmingham, Alabama. The company's subsidiaries market life, dental and credit insurance as well as retirement savings and investment products through independent agents, insurance brokers, stockbrokers, financial institutions, automobile dealers and direct response channels.

The following debt rating has been assigned:

-- Protective Life Corp.:

-- "a+" rating on $100 million floating rate senior notes, due February 2003

The following ratings on existing debt have been affirmed:

-- Protective Life Corp.:

-- "a+" rating on $60 million 7.50% senior notes, due July

2016

-- "a+" rating on $75 million 7.95% senior notes, due July

2004

-- "a+" rating on $50 million 8.00% senior notes, due July

2010

-- "a+" rating on $40 million 8.10% senior notes, due August

2015

-- "a+" rating on $35 million 8.25% senior notes, due October

2030

-- PLC Capital Trust I:

-- "a" rating on $75 million 8.25% Trust Originated Preferred

Securities (TOPrS), backed by subordinated debentures 

The following indicative ratings on securities available under shelf registration have been affirmed:

-- Protective Life Corp.:

-- senior unsecured debt rating of "a+"

-- subordinated debt rating of "a"

-- PLC Capital Trust III and IV:

-- preferred securities rating of "a"

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.