Fitch Rates Golden Gate Captive Insurance Company's $800MM Notes 'AA'.

CHICAGO -- Fitch Ratings has assigned an 'AA' rating to Golden Gate Captive Insurance Company's (Golden Gate) $800,000,000 Series A floating-rate surplus notes (the surplus notes) due 2037.

Golden Gate is a special purpose financial captive insurance company under the laws of the State of South Carolina. Golden Gate is an indirect, wholly-owned subsidiary of Protective Life Corporation (PLC) and was established for the limited purpose of issuing the surplus notes and entering into reinsurance agreements with the following entities, all of which are or were wholly-owned subsidiaries of PLC (the Protective entities):

--Protective Life Insurance Company (PLICO);

--West Coast Life Insurance Company (WCL);

--Empire General Life Assurance Company (EGL);

--Chase Insurance Life and Annuity Company (CILAC);

--Chase Insurance Life Company (CILC).

The block of business ceded to Golden Gate consists of level term life insurance policies issued by PLICO, WCL and EGL from mid-2005 through Dec. 31, 2007. EGL was merged into PLICO effective Jan. 1, 2007. The block also contains certain level term life insurance policies written by CILAC and CILC from 2000 through early 2007. CILAC and CILC were merged into PLICO on April 1, 2007. The policies were ceded to Golden Gate on a co-insurance basis.

The primary risks to noteholders are higher than expected mortality or losses on invested assets such that equity and the residual interests in the reinsurance credit trusts are insufficient to repay the notes. Fitch's 'AA' rating addresses the likelihood that note holders will receive full payments of principal and interest in accordance with the terms of the transaction documents.

The 'AA' rating on the surplus notes also considers the strength of the collateral, which consists of equity in the form of capital contributed by PLICO into Golden Gate and retained earnings. Note holders also have a residual interest in the assets of reinsurance credit trusts set up to support the reinsurance agreements with the Protective entities.

The block of policies ceded by the Protective entities is a reasonably large and diversified block, which increases the credibility of key modeling assumptions that were based on historical experience. An internationally recognized actuarial firm analyzed the cash flows produced by the ceded block and Fitch reviewed their report. Additionally, through stochastic modeling, Fitch modeled the transaction cash flows, using 10,000 thirty-year mortality and investment income scenarios. As part of this analysis, Fitch modeled a 1% annual probability of an extreme mortality event (such as the 1918 influenza epidemic) and also stochastically modeled variations in interest rate spreads and asset defaults. The transaction comfortably passes at the 'AA' level.

Fitch's stochastic modeling gives consideration to yearly-renewal term (YRT) reinsurance purchased by Golden Gate. This reinsurance transfers a portion of the mortality risk to various highly-rated third party reinsurers. However, the structure is exposed to some risk since the future premium rates on YRT reinsurance are not guaranteed. Fitch's stochastic modeling produced a cumulative modeled loss curve that Fitch then compared to its published default rate grid.

The structure also benefits from two capital support agreements with PLC which limit Golden Gate's operating expenses within a set range and limits exposure to certain extreme catastrophic mortality losses incurred as the result of certain acts of terrorism or war.

In assigning the rating, Fitch also considered the 'AA-' Insurer Financial Strength (IFS) ratings of the two surviving Protective entities (PLICO and WCL) and reviewed legal analyses of the structure.

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