Best’s News & Research Service - February 06, 2015 03:58 PM (EST)
A.M. Best Revises Outlook to Negative for Woodmen of the World Life Insurance Society
Oldwick //BestWire// - A.M. Best has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of A+ (Superior) and the issuer credit rating (ICR) of "aa-" for Woodmen of the World Life Insurance Society (Woodmen) (Omaha, NE), which is also known as Omaha Woodmen Life Insurance Society in certain states.
The revised outlook reflects the shift of Woodmen's business profile toward higher exposure to interest sensitive product lines. Premium growth in recent periods has been driven by fixed annuities, which along with existing universal life in-force policies, results in an increasing proportion of interest sensitive reserves. This trend is projected to continue in the near term as sales in traditional life remain modest relative to the universal life and annuity lines of business. While the majority of new fixed annuity premium is credited with modest guaranteed rates, the society faces spread compression from higher guaranteed legacy fixed annuity product lines given ongoing low interest rates.
The affirmation of the ratings reflects Woodmen's presence as one of the largest fraternal societies in the United States. Woodmen has consistently reported favorable operating gains, supported by its life operations. Strong operating earnings and realized capital gains have led to sizable growth in absolute and risk-adjusted capitalization in recent periods.
Factors that could lead to a revision in the rating outlook to stable include improvements in the risk profile through lessened exposure to interest sensitive products and maintaining favorable spread margins in the low interest rate environment. Negative rating actions may occur with an increased risk profile in interest sensitive reserves, declines in earnings as a result of spread compression or a material decrease in risk-adjusted capitalization.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- A.M. Best's Liquidity Model for U.S. Life Insurers
- A.M. Best's Perspective on Operating Leverage
- Risk Management and the Rating Process for Insurance Companies
- Understanding BCAR for U.S. and Canadian Life/Health Insurers
This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best's Ratings & Criteria Center.
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