Patrons' Legacy has quietly priced its sixth securitization of a pool backed by life insurance policies and life annuities. All of these transactions - dubbed LILACs - have been privately placed via UBS.

The $140 million transaction matures in 2064 and was rated Aa3' by Moody's Investors Service. The rating is linked primarily to the lowest of the of the ratings of Axa Equitable Life Insurance, American International Specialty Lines Insurance (AISLIC) and Protective Life Insurance, the three insurance providers participating in the transaction, according to a Moody's report.

These arbitrage transactions match annuities against the individual life insurance polices in the pool, which does away with the need for the kind of in-depth mortality analysis used in straight senior settlement transactions such as the $70 million Legacy Benefits Corp. offering which priced via Merrill Lynch in March.

The pool for Patrons' Legacy 2004-II consists of 28 individuals residing in North Carolina, Tennessee, Texas and the commonwealth of Virginia. Each individual chose a charitable organization located in one of these states to receive a certificate for a beneficial interest in the trust. None of these individuals has participated in any previous Patrons' Legacy transactions, Moody's analysts said.

AISLIC is providing the supplemental policies, and has unconditionally waived all legal defenses with respect to the payment of any amount of insurance, the Moody's report stated. The triple-A rated insurance provider has provided supplemental support on all of the Patrons' Legacy transactions to date.

The previous Patrons' Legacy offering, which closed in May, was larger and had a slightly deeper pool. The $171 million transaction was comprised of 32 individuals - all Texas residents - 24 of which had participated in previous Patrons' Legacy deals.

Rating agencies and bankers have been fielding a growing number of inquiries from potential issuers in the life insurance sector, sources said. However, it has proven difficult to achieve a structure that works (see ASR, 11/29/04).

Nonetheless, market observers are optimistic about the potential for growth in the insurance sector. Of all the emerging asset classes, the insurance sector shows the most promise of reaching full bloom, a source said.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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