CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 26, 2011 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to stable from negative and affirmed the financial strength rating of A+ (Superior) and issuer credit ratings of "aa-" of Midland National Life Insurance Company (Midland National) and North American Company for Life and Health Insurance (NACOLAH) (both domiciled in Des Moines, IA). Midland National and NACOLAH are the key life/health insurance subsidiaries of Sammons Enterprises, Inc. (SEI) and are jointly referred to as the Sammons Financial Group, Inc. (SFG) (Chicago, IL).
The revised outlook notes the continued progress SFG has made in stabilizing and reducing absolute risk in its fixed income portfolio, the lower levels of credit impairments and improvements in the overall credit quality of its investment portfolio, which is now in a net unrealized gain position. In addition, SFG has evidenced strong premium growth, consistently strong net operating gains, solid growth in its risk-adjusted capital levels and continues to maintain a well matched asset/liability program for its interest-sensitive lines of business. The ratings also acknowledge SFG's strong business profile as a top 10 provider of fixed-indexed annuities (FIA), prudent product design, effective hedging programs and the benefits of SEI's unique ownership structure through an Employee Stock Ownership Plan Trust.
Offsetting these positive rating factors are SFG's challenges to grow its ordinary life segment, manage increases in interest sensitive liabilities and the potential disintermediation risk to its FIA book should interest rates rise and equity markets decline. While the group's investment portfolio has demonstrated stable overall investment yields through the active management of Guggenheim Partners Asset Management, LLC, (an affiliated company), these returns have benefited from higher levels of private placement investments, structured holdings and other less liquid alternative securities. Moreover, SFG's fixed income portfolio's unrealized position remains highly sensitive to potential interest rate increases. However, liquidity, credit risk and disintermediation risks are partially mitigated by SFG's strong capital and a highly effective asset liability management program with strong duration matching of assets and liabilities. While capital growth has been strong and supported by organic earnings, it has benefited from increased utilization of affiliated company reinsurance transactions.
The principal methodology used in determining these ratings is Best's Credit Rating Methodology - Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Understanding BCAR for Life and Health Insurers"; "Rating Members of Insurance Groups"; "A.M. Best's Ratings & the Treatment of Debt"; and "Risk Management and the Rating Process for Insurance Companies." Methodologies can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.