AM Best Information Services

MAY 18, 2022 03:48 PM (EDT)

AM Best Affirms Credit Ratings of NLV Financial Corporation and Its Insurance Subsidiaries

 Igor Bass
Senior Financial Analyst
+1 908 439 2200, ext. 5109

Edward Kohlberg
+1 908 439 2200, ext. 5664
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jeff Mango
Managing Director, Strategy & Communications
+1 908 439 2200, ext. 5204


OLDWICK - MAY 18, 2022 03:48 PM (EDT)
AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” (Superior) of National Life Insurance Company (NLIC) (Montpelier, VT) and its wholly owned subsidiary, Life Insurance Company of the Southwest (Addison, TX). Concurrently, AM Best has affirmed the Long-Term Issue Credit Ratings (Long-Term IR) of “a” (Excellent) on the surplus notes of NLIC. Both companies are life insurance subsidiaries of NLV Financial Corporation (NLVF) (headquartered in Montpelier, VT), which is the intermediate holding company in the organization’s mutual holding company structure, and are collectively known as National Life Group (NL Group). AM Best has also affirmed the Long-Term ICR and the Long-Term IRs of “a-” (Excellent) of NLVF. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the Long-Term IRs.)

The ratings reflect NL Group’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management.

The ratings also reflect continued favorable trends in NL Group’s balance sheet strength metrics, supported by its risk-adjusted capitalization, which is at the strongest level and is projected to continue at that level, as measured by Best’s Capital Adequacy Ratio (BCAR). In addition, ongoing strategic initiatives implemented by management have helped to improve the operating performance assessment of NL Group over the intermediate term. Life/annuity sales showed continued strong growth in 2021, as did the results on NL Group’s alternative assets. Although NL Group has improved the risk profile of its investment portfolio through recent de-risking initiatives, the portfolio remains less conservative than some of its peers. Despite a challenging credit market, and against the backdrop of the pandemic, overall default losses and credit migrations remained very limited in 2021, as actual results continued to be well-below stressed scenarios.

In addition, NL Group’s NAIC risk-based capital ratio trend has continued to remain strong and well-above company targets and regulatory requirements over the past several years. NL Group also performed risk-based capital stress testing scenarios as a result of the COVID-19 pandemic, which showed risk-based capital levels remaining in excess of its defined risk thresholds. There has been moderate volatility in net income levels, driven by non-core earnings that reflect GAAP accounting reserving changes for indexed products, as well as short-term movement in equity markets and interest-rate curves.

NL Group has a long history of successfully targeting life insurance and annuity product solutions to the middle market segment through its growing agency force consisting of career and independent agents. NL Group’s strong sales growth trend continued through year-end 2021, but sales could be challenged to grow at a similar pace in the near future due to the continued effects of the pandemic, as well as the continued low interest rate environment and its impact on the insurance industry’s competitive landscape. Higher-than-expected mortality on NL Group’s life insurance business has continued. However, recent profitable growth has led to an improved market position and increasing market share through its niche products, such as its offerings in the K-12 educator and indexed universal life markets. The ERM assessment of appropriate is reflective of NL Group’s well-established governance structure, culture and risk management controls, which is continuing to evolve and become more sophisticated.

The following Long-Term IRs have been affirmed with stable outlooks:

NLV Financial Corporation—

— “a-” (Excellent) on $75 million 6.50% senior unsecured notes, due 2035

— “a-” (Excellent) on $200 million 7.50% senior unsecured notes, due 2033

National Life Insurance Company—

— “a” (Excellent) on $200 million 10.50% surplus notes, due 2039

— “a” (Excellent) on $500 million 5.25% surplus notes, due 2068

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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