Best’s News & Research Service - February 21, 2023 11:03 AM (EST)
AM Best Assigns Credit Ratings to The Ohio State Life Insurance Company
- February 21, 2023 11:03 AM (EST)
Oldwick //BestWire// - AM Best has assigned a Financial Strength Rating of B+ (Good) and a Long-Term Issuer Credit Rating of “bbb-” (Good) to The Ohio State Life Insurance Company (OSL) (Dallas, TX). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect OSL’s balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).
The ratings assigned to OSL also reflect AM Best’s expectation that the company will maintain sufficient capital to support its future business plans. The company currently maintains a conservative investment profile, which is expected to change over time as OSL decreases allocations to NAIC class 2 bonds and increases exposure to a combination of residential and commercial mortgages to further diversify the portfolio. Reinsurance is used to mitigate risk on a closed block of runoff life insurance business. Although capital and surplus declined during third-quarter 2022 with an increase in unrealized losses, this was offset with a capital contribution from its immediate parent company, NexAnnuity Holdings, Inc. (NexAnnuity).
Operating performance on a statutory basis has been unfavorable due to growth from its Multi-Year Guaranteed Annuity (MYGA) products and the related commissions being fully expensed at the time of issuance. Operating expenses have also been impacted by third-party administrative costs associated with OSL becoming fully operational. Based on projections provided, earnings are expected to become favorable.
OSL, which was acquired by NexAnnuity in 2019, began to offer MYGAs in March of 2020. The company grew net premiums written significantly in 2020 and 2021, with products sold in 43 states. Distribution is facilitated through use of the independent agent channel and the independent broker-dealer and registered investment adviser channels. The company continues to adjust pricing and assess distribution opportunities. Further growth is expected in the near-to-medium term with the launch of additional annuity products. However, the limited MYGA product offering today creates a concentration risk within the highly competitive annuity market space and is reflected in the limited business profile assessment.
While ERM is appropriate for the size and scope of OSL’s risks, its business strategy is subject to execution risk and the company will need to continue to enhance its risk framework. AM Best will continue to monitor OSL’s progress as the company implements its business plan.
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.