A.M. Best Assigns Rating to Great-West Life and Annuity Insurance Capital, LP II's Debentures.

OLDWICK, N.J. -- A.M. Best Co. has assigned a debt rating of "a-" to Great-West Life and Annuity Insurance Capital, LP II's (GW LP) (Delaware) $300 million fixed/adjustable rate enhanced capital advantaged subordinated debentures (ECAPS), due 2046. The existing financial strength, issuer credit and debt ratings of Great-West and its subsidiaries remain unchanged. The outlook for all ratings is stable.

Through a series of transactions, the proceeds will ultimately be invested into Great-West Life & Annuity Insurance Company (GWL&A) (Greenwood Village, CO), which will issue a surplus note to an intermediate holding company. Interest on the GW LP debentures may be deferred, subject to a limit of 20 consecutive semi-annual periods. However, after 10 semi-annual periods, GW LP must attempt to raise capital to pay the interest in full and on a compound basis. In the case of a mandatory deferral, GW LP must attempt to raise capital immediately and if unsuccessful, Great-West Lifeco (Great-West) (Winnipeg, Manitoba) will provide necessary funds through a common share purchase.

The GW LP debentures will be fully and unconditionally guaranteed by an affiliate, GWL&A Financial Inc., on a junior subordinated basis. The companies are wholly owned subsidiaries of Great-West.

Should GW LP choose to call the issue after 2016, replacement securities with similar or greater equity features would need to be issued. As such, A.M. Best has granted 75% equity credit in the company's financial leverage calculations to fund the compounded interest in full.

Given the equity-like features and deep subordination of the issue, A.M. Best has rated the securities at Great-West's existing preferred share level.

The rating is based upon Great-West's solid operating fundamentals, including its strong capitalization and liquidity posture, superior financial performance, significant scale advantages in core business lines and conservative investment management strategy.

Offsetting rating factors include a heightened level of goodwill and leverage associated with acquisition activity and challenges associated with achieving stronger growth in GWL&A's core self-funded medical business and retirement services business segments.

For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

For current Best's Ratings, independent data and analysis on more than 1,100 individual life/health companies and A.M. Best groups, please visit www.ambest.com/lh.

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.