A.M. Best Downgrades ICRs and Affirms FSR of Protective; Revises Outlooks to Negative

A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and downgraded the issuer credit ratings (ICR) to �aa-� from �aa� of the primary life/health subsidiaries of Protective Life Corporation (Protective) (Birmingham, AL) [NYSE: PL] led by Protective Life Insurance Company (PLIC) (Brentwood, TN). Concurrently, A.M. Best has downgraded the ICR to �a-� from �a� and debt ratings of Protective. In addition, A.M. Best has downgraded the debt ratings of the outstanding notes issued for the various funding agreement-backed securities (FABS) programs of PLIC. The outlook for all ratings has been revised to negative from stable. (See link below for a detailed listing of the companies and ratings.)

The downgrades reflect the decline in PLIC�s risk-based capital position during 2008 as a result of realized investment losses and the accumulation of reserve strain from recently issued term and universal life insurance business. The downgrades also reflect A.M. Best�s expectation that near-term improvement in PLIC�s capital ratio will be dampened by likely adverse investment experience and by the build-up of excess statutory reserves as Protective issues new business. Prior to the credit market freeze, PLIC�s capital ratio benefited from capital market securitizations, whereby external funding was raised, and statutory capital was subsequently released, when blocks of excess reserves were securitized through captive reinsurers.

The negative outlook reflects the likelihood of additional, and possibly significant, investment losses as indicated by Protective�s net unrealized loss position. With the severe credit spread widening that occurred during fourth quarter 2008, Protective�s GAAP net unrealized losses as of December 31, 2008 totaled nearly $1.7 billion or approximately two-thirds of gross stockholders� equity. The negative outlook also recognizes the limitations on Protective�s financial flexibility as a result of its current level of leverage combined with the ongoing turmoil in the financial markets. Protective�s all-in financial leverage�senior debt plus hybrids�is slightly over 30% and near the upper end of the range for its ratings. Additionally, Protective�s future earnings may be reduced due to a smaller contribution from the stable value segment as the stable value market has been hampered by the credit freeze. Protective�s ratio of deferred acquisition costs to equity has risen significantly over the past year and may pressure the ratings should the ratio remain elevated for an extended period.

Offsetting these negative rating factors are Protective�s diversified revenue and profit sources, broad distribution capabilities and its strong track record of effectively integrating acquired insurance companies and blocks of business. Despite the net loss for 2008, A.M. Best notes that Protective�s business mix of primarily traditional life insurance provides for greater earnings stability than other companies that have large equity market exposures. The stable, recurring premiums associated with Protective�s seasoned block of life business are a source of strength, and the block contains significant embedded profits. A.M. Best also notes that Protective has sufficient liquidity in cash, short-term holdings and expected asset cash flows to meet scheduled maturities without the need for asset sales, stable value liability sales or external debt funding. Additionally, Protective does not have a significant corporate debt maturity until 2013.

For a complete listing of Protective Life Corporation�s FSRs, ICRs and debt ratings, please visit www.ambest.com/press/021102protective.pdf.

The principal methodologies used in determining these ratings, including any additional methodologies and factors, which may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

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