Continued uncertainty over the capital remediation plans of Bermuda-based Security Capital Assurance (SCA) and the change in credit profile of XL Capital has led AM Best Co. to downgrade the debt rating of $134 million floating rate insured notes issued by Forethought Life Assurance Company (FLAC) Holdings.

Best downgraded the debt rating to "a-" from "a" and the rating remains under review with negative implications.

SCA is a bond insurer part-owned by Bermuda-based XL Capital.

The ratings agency's rating takes into account the financial strength rating of FLAC; the stand-alone rating of the notes; a review of the actuarial assumptions and their impact on the collateral cash flow; an analysis of the deal model cash flow projections including stress testing of key risk factors, interest rate and investment conditions; and a review of the structure, legal documentation and regulatory environment.

In addition, Best considered the payment assurance provided by XL Capital Assurance Inc., a financial guarantor and operating subsidiary of SCA.

It said the rating downgrade is solely due to concerns regarding financial pressures and the uncertainty surrounding SCA in carrying out its capital remediation plans and the change in credit profile of XL Capital Group (Cayman Islands), which provides substantial reinsurance support to SCA's operating subsidiaries and guarantees certain SCA obligations.

XL shares rose 94 cents to $39.10 in trading yesterday and SCA dropped six cents to $1.74.