A.M. Best Affirms Ratings of National Life Group -VT-; Revises Outlook to Stable.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and has assigned issuer credit ratings (ICR) of "a" to National Life Group's (National Life) key insurance subsidiaries, National Life Insurance Company of Vermont (NLV) (Montpelier, VT) and its subsidiary, Life Insurance Company of the Southwest (LSW) (Dallas, TX). Concurrently, A.M. Best has affirmed the senior debt ratings of "bbb" and the ICR of "bbb" of NLV Financial Corporation (NLV Financial) (Montpelier, VT), an intermediate holding company within National Life's mutual holding company structure. The outlook for all ratings has been revised to stable from negative.

The revised outlook reflects significantly improved financial metrics for National Life, which include positively trending sales and operating earnings, strong growth in absolute and risk-adjusted capitalization and solid growth in assets under management. The ratings reflect the group's strong sales growth, particularly equity indexed annuities (EIA), which are sold primarily within the 403(b) market with an emphasis on product suitability. The ratings also recognize National Life's improved operating fundamentals, including maintenance of strong investment spreads despite low interest rate levels, higher asset management fees and favorable persistency and mortality trends as well as lower operating expenses.

National Life continues to diversify its distribution and product platform, which is complemented by the excellent performance of its mutual fund family, The Sentinel Funds, and strong marketing niche in the 403(b) market through LSW. In addition, A.M. Best notes that National Life has reduced its exposure to below investment grade bonds, strengthened its risk management practices and improved the level of its financial discipline.

These factors are offset by modest life related productivity declines in the group's career agency distribution channel and increased levels of competition in the EIA marketplace. In addition, the company will need to continue to manage expense levels to maximize profitability. While National Life's total debt-to-capital has increased over the last several years, its current level of approximately 20% is prudent for the current rating category. Additionally, interest coverage is strong and the company is well-positioned to meet its liquidity needs.

National Life markets a broad portfolio of products through three major business segments: life insurance, annuities and mutual funds. Its products are marketed through diversified channels with an emphasis on the 403(b) qualified tax deferred retirement savings marketplace, middle income individuals, small business owners and professionals.

The following debt ratings have been affirmed:

NLV Financial Corporation--

--"bbb" on $75 million 6.50% senior unsecured notes, due 2035

--"bbb" on $200 million 7.50% senior unsecured notes, due 2033

For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.