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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JUNE 28, 2013 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating of B++ (Good) and issuer credit rating of bbb+ of National Farm Life Insurance Company (NFLIC) (Fort Worth, TX).
The positive outlook reflects NFLICs continued trend in profitably growing life premiums within its niche market in rural Texas, its improved investment results (after large capital losses in 2008 and 2009) and steady growth in risk-adjusted and absolute capital.
The company has reported positive net income for the last four years despite the increased costs associated with its new business growth. The acquisition of a block of life policies from an unaffiliated insurer is expected to provide additional income through increased premium revenue and decreased overall per policy cost of administration.
Results within NFLICs investment portfolio have improved since realizing large capital losses in 2008 and 2009. Enhanced investment performance has supported efforts to build capital as the companys atypical legal structure limits access to capital markets. A.M. Best anticipates that the increased asset base as a result of the block acquisition will lead to increased investment income and profitable results, further improving NFLICs risk-adjusted capital.
NFLICs geographic concentration in only Texas exposes it to potential risks, including economic, regulatory and legislative risks. In addition, the companys revenue and earnings sources are not very well diversified as it primarily sells traditional life products.
Key rating factors that could result in positive rating actions for NFLIC include continued favorable trends in its operating results and capitalization. Conversely, if the company reports unfavorable operating performance, a decline in risk-adjusted capital or deterioration in its investment portfolio, the ratings could be pressured downward.
The methodology used in determining these ratings is Bests Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bests rating process and contains the different rating criteria employed in the rating process. Bests Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the worlds oldest and most authoritative insurance rating and information source.