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Announcement:

Moody's affirms Protective Life (senior debt at Baa2) following acquisition announcement

Global Credit Research - 14 Sep 2010

New York, September 14, 2010 -- Moody's Investors Service today affirmed the debt ratings of Protective Life Corporation (Protective; NYSE: PL; senior debt at Baa2) and the A2 insurance financial strength (IFS) rating of its operating subsidiaries, following the company's announcement that it had signed a definitive agreement to acquire United Investors Life Insurance Company (UILIC) (IFS rating at A3) from Torchmark Corporation (senior debt at Baa1). Protective's rating outlook is stable. The transaction is expected to close in the fourth quarter of 2010, subject to regulatory approval.

Moody's said that Protective's lead life insurance operating company, Protective Life Insurance Company (PLICO), is expected to purchase UILIC for approximately $316 million in cash, including about $130 million in capital and surplus at UILIC following the removal of certain assets and liabilities prior to closing. The purchase price reflects approximately $56 million of statutory capital in excess of 350% NAIC risk based capital. UILIC's closed block of individual term and universal life insurance and annuities, with about $1.4 billion in reserves, will become part of Protective's Acquisition segment.

The rating agency said the affirmation of Protective's ratings reflects the financing of the transaction entirely with internally generated funds at PLICO, which will maintain the group's financial leverage at a conservative 25% (as of June 30, 2010), while providing a modest boost to interest coverage. In addition, UILIC has a relatively low risk profile given its seasoned portfolio of individual life insurance policies and lower-risk annuities, an investment portfolio comprised predominately of investment grade corporate bonds, and a stable source of incremental mortality-driven earnings—albeit relatively modest in comparison to Protective's overall earnings capacity.

Moody's Vice President and Senior Credit Officer, Ann Perry commented, "UILIC's block of business is a good fit for Protective, and this transaction leverages Protective's core competency of acquiring small life insurance companies and blocks of business. Protective has a proven track record of integrating blocks of policies with its own systems and administering the business on a cost-efficient basis." The rating agency added that it believes that PLICO will remain adequately capitalized following this acquisition.

According to the rating agency, Protective's ratings reflect the company's diverse revenue and earnings sources, multiple distribution channels, and stable earnings from a number of acquired blocks of individual life insurance business. Protective's investment losses have lessened in 2010 compared to 2009, and are expected to continue to decrease throughout the remainder of the year. Protective also has no short-term debt outstanding, and its next significant debt maturity is $250 million due in 2013.

However, Moody's said that Protective faces challenges in light of a continuing weak economy and the pressure that a stress scenario could place on its earnings and regulatory capital. In addition, the company's regulatory earnings and capital are constrained by the growth in reserve strain from inforce term insurance business and no-lapse universal life.

The following ratings were affirmed with a stable outlook:

Protective Life Corporation -- senior unsecured debt at Baa2; senior unsecured shelf at (P)Baa2; subordinated shelf at (P)Baa3; preferred shelf at (P)Ba1; junior preferred shelf at (P)Ba1; capital securities at Ba1;

Protective Life Insurance Co. -- insurance financial strength at A2; short-term insurance financial strength at Prime-1;

West Coast Life Insurance Co. -- insurance financial strength at A2;

PLC Capital Trusts III-V -- trust preferred at Baa3;

PLC Capital Trusts VI-VIII -- trust preferred shelf at (P)Baa3;

Protective Life Secured Trusts -- senior secured at A2;

Protective Life U.S. Funding Trusts -- senior secured at A2;

Protective Life Insurance Company -- Premium Asset Trust Series 2003-10 at A2.

General Repackaging ACES SPC 2006-1, General Repackaging ACES SPC 2007-1 -- funding agreement-backed senior secured debt rating at A2.

On June 30, 2010, the company reported total consolidated GAAP assets of approximately $44.6 billion and shareholders' equity of about $3.1 billion.

The principal methodology used in rating Protective was "Moody's Global Rating Methodology for Life Insurers," which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating Protective can also be found in the Rating Methodologies sub-directory on Moody's website.

Moody's insurance financial strength ratings are opinions of the ability of insurance companies to pay punctually senior policyholder claims and obligations.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Visit Moody's website at www.moodys.com/insurance for more information.

New York
Ann G. Perry
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Joel Levine
Senior Vice President
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

Moody's affirms Protective Life (senior debt at Baa2) following acquisition announcement
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