Best’s News & Research Service - July 29, 2022 11:13 AM (EDT)
AM Best Affirms Credit Ratings of Sammons Financial Group, Inc. and Its Subsidiaries
- July 29, 2022 11:13 AM (EDT)
Oldwick //BestWire// - AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” (Superior) of Midland National Life Insurance Company (Midland National) and North American Company for Life and Health Insurance (North American) (both domiciled in West Des Moines, IA). In addition, AM Best has affirmed the Long-Term ICR of “a-” (Excellent) and the Long-Term Issue Credit Ratings (Long-Term IRs) of Sammons Financial Group, Inc. (Delaware). In addition, AM Best has affirmed the Long-Term ICR of “aa-” (Superior) of Sammons Financial Group Global Funding. The outlook of these Credit Ratings (ratings) is stable. Sammons Financial Group, Inc. is an intermediate holding company for Midland National and North American, and is indirectly owned by Sammons Enterprises, Inc. Midland National and North American – the group’s key life/health insurance subsidiaries – are jointly referred to as Sammons Financial Group (SFG). (See below for a detailed listing of the Long-Term IRs).
The ratings reflect SFG’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 (ERM).
SFG maintains a very strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), although down from historical levels due to a significant increase in annuity sales in 2020 and a strategic decision to acquire lower-rated corporate bonds in recent periods. The overall balance sheet strength has been supported historically by increasing levels of capital and surplus due to the retention of strong albeit somewhat volatile earnings and capital contributions from its parent. In addition, SFG maintains very good liquidity and strong cash flows from operations, as well as surrender charge protection on the majority of its inforce annuities. The group also has good financial flexibility with demonstrated access to the capital markets if needed and access to the Federal Home Loan Bank. SFG maintains strong interest coverage ratios, and financial leverage remains well-within AM Best guidelines for its current ratings.
SFG benefits from a diverse distribution platform, which includes personal producing agents, independent marketing organizations, broker/dealers and banks, as well as credit unions. In addition, SFG has increased its focus and expansion into the registered investment adviser channel in recent periods. The group also offers a wide array of product offerings with generally favorable market positions in its core lines of business and has entered the pension risk transfer market recently. This diversification, along with historical investments in digital capabilities, enabled the company to increase premiums significantly during the COVID-19 pandemic. However, AM Best notes that annuity sales have fluctuated over the past five years due to the low interest rate environment and a focus on capital management. SFG maintains an extensive ERM program that is evolving continually and is commensurate with its risk profile.
While SFG maintains very strong balance sheet metrics, AM Best notes that the use of surplus notes and captive financing solutions, as well as the recent establishment of a Bermuda-based reinsurance affiliate in order to take advantage of capital efficiencies reduces the overall quality of capital. SFG also has strategically reduced the overall credit quality of its general account investment portfolio in recent periods, although it remains well-within industry averages. AM Best notes that SFG had only a modest amount of investment impairments over the most recent period after experiencing a somewhat elevated level of impairments during the prior year. The investment losses were confined primarily within airline securitizations in its asset-backed securities portfolio and its investments in the energy sector, two areas hardest hit by the COVID-19 pandemic. SFG has been reducing its exposure to asset-backed securities in recent periods, and AM Best does not expect significant impairments over the near term.
The following Long-Term IRs have been affirmed with stable outlooks:
Sammons Financial Group, Inc.:
— “a-” (Excellent) on USD 500 million 4.75% senior unsecured notes, due 2032
— “a-” (Excellent) on USD 850 million 3.35% senior unsecured notes, due 2031
— “a-” (Excellent) on USD 250 million 7% senior unsecured notes, due 2043
— “a-” (Excellent) on USD 500 million 4.45% senior unsecured fixed rate, due 2027
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.