First Colony Life Insurance Company recently completed the first triple-X securitization off of its River Lake II special purpose insurance company. Lehman Brothers led the $300 million offering.

The transaction was rated by both Moody's Investors Service and Standard & Poor's, and backed by an MBIA wrap. Regulation Triple-X, the rule governing the cash reserve insurance companies must keep against their term life portfolios, has spurred insurance carriers to turn to the securitization markets for relief. Outdated mortality tables mandates that insurance providers carry as much as eight times more than is actually at risk (see ASR, 11/01/2004).

This most recent transaction succeeds two prior triple-X securitizations by First Colony off of the original River Lake vehicle. River Lake and River Lake II are in no way connected, sources said. "[River Lake II] is a separate block of business," said a source familiar with the deal.

First Colony is a subsidiary of Genworth Financial, which was created when parent company General Electric spun off much of its GE Financial subsidiary in May. River Lake II's notes are due in 2035, according to Genworth's most recent 8-k filing. Interest pays monthly on the floating rate deal.

The two previous First Colony offerings, also via Lehman, were $300 million each. Both platforms are expected to continue to issue notes as the triple-X reserve redundancies continue to build on their respective blocks of business.

In addition to the First Colony transactions, Lehman completed a triple-X deal with Legal & General last month. The $550 million transaction was wrapped to a triple-A by Ambac. Several other term life insurance providers have lately gone public with their interest in using the securitization market as a fix for the triple-X redundancy, including Scottish Re and Protective Life. The bankers are "swarming", one source reported, however, Lehman has thus far been the only firm to successfully execute a deal.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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