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Rating Action:

Moody's rates Double Oak Capital Trust Securities Aaa

19 Jul 2007
Moody's rates Double Oak Capital Trust Securities Aaa

New York, July 19, 2007 -- Moody's Investors Service has assigned a Aaa rating, with a stable outlook, to $575 million of Double Oak Capital Trust Securities Series 2007 -- I through IV (collectively referred to as Double Oak Securities), due in 2052, to be issued out of Double Oak Capital Trusts 2007 -- I through IV (Double Oak Trusts), respectively. The rating of the Double Oak Securities is based upon financial guaranty insurance policies to be provided by MBIA Insurance Corporation (MBIA, rated Aaa for insurance financial strength (IFS)). The securities are being offered and sold under Rule 144A.

The Series 2007 - I, 2007 - II, and 2007 - III securities will pay interest at a rate determined via an auction mechanism every 28 days. The spread to one-month LIBOR on the Series 2007 - IV security will remain constant until July 26, 2019. After July 26, 2019, the interest payable on the Series 2007 - IV security will be determined via an auction mechanism every 28 days in a manner similar to the Series 2007 - I, 2007 - II, and 2007 - III securities.

The Double Oak Trusts, created as part of a collateral funding transaction, will purchase and hold an equal par amount of surplus notes, which have payment terms identical to the Double Oak Securities. The surplus notes will be issued by Golden Gate II Captive Insurance Company (Golden Gate II), a wholly-owned subsidiary of Protective Life Insurance Company (Protective Life, rated Aa3 for IFS), which is an operating company of Protective Life Corporation (Protective, NYSE: PL; rated A3 for senior unsecured debt). Golden Gate II, domiciled in South Carolina, exists for the sole purpose of entering into a reinsurance agreement with Protective Life to facilitate the funding of its redundant statutory reserves for the ceded universal life policies with secondary guarantees subject to Actuarial Guideline 38 ("AXXX").

According to the rating agency, the primary source for Golden Gate II to service its surplus note payments is the investment cash flows received on the assets the company acquires with the proceeds of the debt issuance and, to a lesser extent, reinsurance profits. The acquired assets will be used as required to fund a regulatory reinsurance credit trust account for the purpose of securing the statutory reinsurance reserve credit that Protective Life takes with respect to its reinsurance transaction with Golden Gate II. Since the transaction is structured without recourse -- except as noted below - to Protective Life or any other Protective entity, Moody's says that it will exclude Golden Gate II's surplus notes and capital from Protective's financial leverage, coverage, and operating ratios.

The rating agency notes that the interest crediting risks associated with the underlying policies, a substantial risk for universal life policies subject to AXXX, are subject to an interest support arrangement with Protective.

Moody's also comments that given some ceded redundant reserves will likely be outstanding at the surplus notes' maturity, and because the regulator will require that sufficient collateral remain in the trust to support the then current reinsurance reserve credit, repayment of Double Oak Securities (without giving effect to the financial guaranty insurance policy) may depend on Golden Gate II's ability to find an alternative means of providing collateral for the excess reserves at such time. To mitigate this refinancing risk, Protective has agreed, under certain circumstances, to provide the Double Oak Trusts a certain amount of liquidity in the event that the Double Oak Trusts do not have sufficient funds available to fully redeem the Double Oak Securities. In addition, Protective will use commercially reasonable efforts to secure a letter of credit ten years in advance of the maturity of the Double Oak Securities to secure this liquidity commitment.

Protective, headquartered in Birmingham, Alabama, had total assets of $39.8 billion and shareholders' equity of $2.4 billion as of March 31, 2007.

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

For more information, visit our website at www.moodys.com/insurance.

New York
Robert Riegel
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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

No Related Data.
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