CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JANUARY 13, 2005 12:00 AM (EST)
A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) of The Ohio National Life Insurance Company (ONLIC) and its wholly-owned subsidiary, Ohio National Life Assurance Corporation (ONLAC). A.M. Best has also assigned an issuer credit rating (ICR) of "aa-" to ONLIC. These companies are the principal insurance subsidiaries of Ohio National Financial Services, Inc. (ONFS), which is the penultimate holding company in the organization's mutual holding company structure. Concurrently, A.M. Best has affirmed the existing debt ratings of ONFS' outstanding senior notes and the ICR of "a-"and the existing surplus notes of ONLIC. All companies are headquartered in Cincinnati, OH. The outlook for all ratings is stable.
These ratings reflect the group's strong organic sales growth, diversified distribution, effective asset/liability management, improving operating returns and solid investment performance. Ohio National's increasing market penetration in its core life and annuity business is facilitated by an efficient expense structure supported by advanced technology platforms. These strengths are partially offset by the group's capitalization being somewhat below expectations for its rating category - although NAIC risk-based capital remains sound - and its above-average exposure to mortgage loans and below investment grade bonds relative to capital. A.M. Best notes ONFS' moderate financial leverage - currently about 25% - and operating leverage (net premiums to capital), are somewhat offset by solid interest coverage and low exposure to riskier investment classes. Although Ohio National's operating trends - on both GAAP and statutory bases - continue to show considerable improvement, its returns have historically trailed similarly-rated peers.
This action follows the recent announcement that Ohio National's plan to acquire Security Mutual Life Insurance Company of New York (Security Mutual) (Binghamton, NY) via a sponsored demutualization has been terminated due to failure to obtain regulatory approval from the New York Insurance Department (NYID). Regulatory approval was declined as a result of the companies' inability to reach a stock purchase agreement that was satisfactory to the NYID. This transaction, if consummated, had been expected to enhance Ohio National's regional presence in the New York market place and provide broader product and distribution capabilities to Security Mutual.
A.M. Best has also affirmed the financial strength rating of A+ (Superior) of National Security Life and Annuity Company (NSLAC) (Binghamton, NY), ONLIC and Security Mutual's existing joint venture that markets variable annuities. The rating outlook is stable.
Although the joint venture potentially facilitates development of Ohio National's presence in the New York metropolitan market place, the Security Mutual acquisition would have immediately improved Ohio National's New York geographic footprint, while significantly increasing the scale of its life insurance business. While termination of the agreement is not material to Ohio National's ratings, A.M. Best viewed the proposed acquisition as strategically important to enhancing its geographic profile and providing a better balance between accumulation and protection product earnings.
The following debt ratings have been affirmed:
Ohio National Financial Services, Inc. -
- "a-" on $200 million 7% senior unsecured notes, due July 2011
- "a-" on $150 million 6.35% senior unsecured notes, due April 2013
Ohio National Life Insurance Company -
- "a" on $50 million 8.5% surplus notes, due May 2026
For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit Best's Rating Center.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.