A.M. Best Assigns Ratings to FLAC Holdings.

OLDWICK, N.J. -- A.M. Best Co. has assigned senior secured debt ratings of "aaa" to two series of floating rate insured notes, Series A Notes and Series B Notes, with a total principal amount of $150 million, issued by FLAC Holdings, LLC (FLAC Holdings). The rating outlook is stable.

A.M.   Principal
Offered      Best     Amount
Notes       Rating ($Millions) Interest    Maturity    Note Insurance
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                                           Scheduled      Financial
Series A                        3 month   Maturity 2007   Guaranty
Floating     aaa      $50       LIBOR +   Amortization  provided by XL
Rate Notes                       0.40%     from years      Capital
                                          2005 to 2007  Assurance Inc.
                                                           ("XLCA")
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                                           Scheduled      Financial
Series B                        3 month   Maturity 2014   Guaranty
Floating     aaa     $100       LIBOR +   Amortization  provided by XL
Rate Notes                       0.55%     from years      Capital
                                          2008 to 2014  Assurance Inc.
                                                           ("XLCA")

E[acute accent]The notes represent a securitization of future distributable cash flows from a defined block of in-force business, which was reinsured into Forethought Life Assurance Company (FLAC), a wholly-owned subsidiary of FLAC Holdings, with regulatory approval in June 2004, when FFS Holdings, Inc. (FFS) acquired Forethought Financial Services, Inc. and all of its subsidiaries from Hillenbrand Industries, Inc. (Hillenbrand). The defined block is primarily comprised of participating pre-need insurance policies and annuities. FLAC Holdings, a wholly- owned subsidiary of American Industries Family Life Insurance Company (AIFLIC), will distribute 85% of note sale proceeds to AIFLIC. AIFLIC will dividend these proceeds to its parent, FFS, which will use such funds to pay a portion of the acquisition from Hillenbrand. Debt service for the notes is sourced from: (1) Debt Service Coverage Account (DSCA), which is initially funded with 15% of the proceeds or $22.5 million; (2) all dividends and other distributions from FLAC to FLAC Holdings; (3) all investment income on DSCA; (4) net tax payments into FLAC Holdings; and (5) any net payments received from the swap counterparty or its credit support providers. E[acute accent]The notes do not have recourse to AIFLIC or any of its affiliates or subsidiaries. Debt service from dividend cash flow is subordinate to prior claims by defined block policyholders. Those claims, however, are reasonably predictable over the long term so that the defined block assets, based on a report provided by an actuarial consultant, are expected to meet policyholder obligations stretching out over an extended long-term horizon. The defined block's projected asset/liability ratio, as its assets are utilized to meet defined block policyholder obligations over time, is a key measure of the expected performance of the defined block. E[acute accent]A.M. Best considered three key risks in particular in deriving the rating offering: (1) financial market risk in the form of interest rate risk; (2) insurance risk in the form of mortality risk; and (3) financial credit risk in the form of default risk. A.M. Best evaluated the collateral manager's multiple cash flow scenario analysis on the transaction with respect to interest rate shock in assets and mortality/death rate shock in liabilities of the defined block. A.M. Best considered the bond insurance and the swap insurance wrapped by XLCA for credit risk transfer. E[acute accent]The "aaa" ratings reflect the assessment of financial market risk and insurance risk against assets and surplus and the credit risk transfer, which the bond insurance's interest and principal payment schedule, if any, satisfies A.M. Best's concern of possible credit risk exposure in the event of predefined default events. E[acute accent]Finally, A.M. Best will closely monitor the performance of the underlying collateral, and regular contact will be maintained with the trustee, JPMorgan Chase Bank, to ensure that material changes are communicated and assessed. E[acute accent]For a list of A.M. Best's debt ratings, please visit http://www.ambest.com/debtratings/. E[acute accent]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.