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Best’s News & Research Service - January 06, 2023 02:27 PM (EST)

AM Best Affirms Credit Ratings of Western & Southern Financial Group, Inc. and Its Subsidiaries

  • January 06, 2023 02:27 PM (EST)
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Oldwick //BestWire// - 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 the life insurance subsidiaries of Western & Southern Financial Group, Inc. (WSFG). The WSFG subsidiaries included in this rating unit are The Western and Southern Life Insurance Company (WSLIC), Western-Southern Life Assurance Company, Columbus Life Insurance Company, Integrity Life Insurance Company, National Integrity Life Insurance Company (Greenwich, NY) and The Lafayette Life Insurance Company (Lafayette Life) (collectively referred to as W&SF Group). All companies are domiciled in Cincinnati, OH, unless otherwise specified. The outlook of these Credit Ratings (ratings) is stable.

Concurrently, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a+” (Excellent) of Gerber Life Insurance Company (Gerber Life) (White Plains, NY). In addition, AM Best has affirmed the Long-Term ICR of “a” (Excellent) and the Long-Term Issue Credit Ratings (Long-Term IR) on the senior unsecured notes of WSFG. The outlook of these ratings is stable. (See below for a detailed list of the Long-Term IRs.)

The ratings reflect W&SF Group’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, favorable business profile and very strong enterprise risk management. W&SF Group’s balance sheet strength continues to be supported by the strongest quantitative measures of risk-adjusted capitalization and strong financial flexibility with diverse sources of additional liquidity available. The group’s liquidity is strong, as measured by AM Best, with modest financial and operating leverage and strong interest coverage. Net cash flows have exceeded $2.0 billion for the past four years for W&SF Group. The group’s capital position has been resilient in stressed scenarios and AM Best expects W&SF Group to maintain its strongest level in the near term as measured by Best’s Capital Adequacy Ratio (BCAR). W&SF Group continues to accumulate additional capital in relation to peers in order to secure future growth options. While the overall investment portfolio is of good credit quality, exposure to below investment grade bonds, equities and asset-backed securities have been growing and is higher than industry benchmarks. Finally, the ratings also recognize continued capital maintenance guarantees from WSLIC, excluding Gerber Life, to all insurance subsidiaries and its affiliate, Lafayette Life.

Statutory operating performance has been somewhat volatile for the W&SF Group, reflecting sustained fluctuating earnings within the group’s ordinary life insurance line of business. There is some projected business strain, driven by improved life insurance sales and a projected decline of GAAP net gains for 2022 from market volatility. Earnings are diversified across the W&SF Group’s brands and product offerings are somewhat augmented by growth from new sources of distribution. Despite some improvement in earnings mainly driven by annuities for its rating level, the continued overall operating performance trend metrics still have not kept up with some of its peers during the last couple of years in a highly competitive U.S. life and annuity market.

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

The Gerber Life brand, which is one of the most recognized financial service brands in the U.S. market, has continued to steadily improve its operating earnings lately through additional direct-to-consumer sales growth, as well as stronger year-over-year net investment income through integration with W&SF Group.

AM Best expects Gerber Life to continue to improve its business profile strength of brand and distribution capabilities over the medium term, with the additional acquisition of Fabric Technologies in 2022, which provides Gerber Life with an enhanced digital platform to successfully compete.

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

Western & Southern Financial Group, Inc. —

— “a” (Excellent) on $500 million 5.75% senior unsecured notes, due 2033

The Western and Southern Life Insurance Company—

— “a+” (Excellent) on $500 million 3.75% surplus notes, due 2061

— “a+” (Excellent) on $500 million 5.15% surplus notes, due 2049

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.

Best's Capital Adequacy Ratio (BCAR) United States Ohio Press Release A.M. Best Rating Services, Inc. Insurance Issue Credit Rating Best's Credit Rating Action Issuer Credit Rating Life Insurance

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