A.M. Best Affirms Ratings of Ohio National; Downgrades Rating on Joint Venture.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) of The Ohio National Life Insurance Company (ONLIC) and its wholly owned subsidiary, Ohio National Life Assurance Corporation (together, referred to as Ohio National). A.M. Best has also affirmed ONLIC's issuer credit rating (ICR) of "aa-" and the "a" rating on its outstanding surplus notes. These companies are the principal insurance subsidiaries of Ohio National Financial Services, Inc. (ONFS), which is the intermediate holding company in the organization's mutual holding company structure. Concurrently, A.M. Best has affirmed the "a-" ICR and existing debt ratings of ONFS' senior unsecured notes. All companies are headquartered in Cincinnati, OH. The outlook for all ratings is stable.

The ratings reflect Ohio National's positive growth trends in its core life and annuity lines, strong embedded operating returns, broad competitive product offerings and diverse distribution channels. The company also benefits from an efficient expense structure, a disciplined approach to spread management, effective asset/liability management and solid investment performance.

These strengths are offset by moderate financial leverage at the intermediate holding company--albeit reduced to 23% from 28% two years prior--and the group's challenge to increase market share as Ohio National maintains competitive but not leading or strong market positions in any of its core lines. A.M. Best notes that interest coverage is solid at six to seven times and that Ohio National has increased market penetration growing life sales consistently for 16 years in a row.

Additionally, Ohio National has considerable exposure to interest sensitive liabilities (70% of reserves) and maintains an investment portfolio that is less liquid and somewhat riskier than those of similarly-rated peers. This is evidenced by over $200 million of aggregate capital losses over the last five years. A.M. Best notes that Ohio National's conservative risk management strategies and its membership with the Federal Home Loan Bank of Cincinnati helps to mitigate disintermediation and liquidity risks.

A.M. Best has downgraded the FSR of National Security Life and Annuity Company (NSLAC) (Binghamton, NY) to A (Excellent) from A+ (Superior). The outlook for the rating is stable. NSLAC is a joint venture owned since January 2002 by ONFS and Security Mutual Life of New York that markets variable annuity products within the state of New York.

Although NSLAC continues to be well-capitalized, sales since its existence have been minimal and the level of operating activity and business profile is uncharacteristic of a Superior-rated entity. In accordance with A.M. Best's methodology for rating insurance groups, NSLAC receives some rating enhancement due to its integration with ONFS' distribution, products and systems platforms. A.M. Best notes that Ohio National has recently established additional selling agreements with securities brokerage firms and banks to market variable annuities and has developed several new offerings with living benefit riders.

The following debt ratings have been affirmed:

Ohio National Financial Services, Inc. -

--"a-" on $200 million 7.00% senior unsecured notes, due July 2011 ($42.5 million of the 7.00% notes were retired in March 2003)

--"a-" on $150 million 6.35% senior unsecured notes, due April 2013

Ohio National Life Insurance Company -

--"a" on $50 million 8.50% surplus notes, due May 2026

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