A.M. Best Affirms Ratings of Ohio National Financial Services, Inc. and Its Subsidiaries.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa-" of The Ohio National Life Insurance Company (ONLIC) and its wholly owned subsidiary, Ohio National Life Assurance Corporation (ONLAC) (together, referred to as Ohio National). A.M. Best also has affirmed the debt rating of "a" on the outstanding surplus notes of ONLIC. 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 ICR of "a-" and debt rating of "a-" on the senior unsecured notes of ONFS. All the above companies are headquartered in Cincinnati, OH.

Additionally, A.M. Best has affirmed the FSR of A (Excellent) and ICR of "a+" of National Security Life and Annuity Company (NSLAC) (Binghamton, NY). NSLAC is a joint venture, which is approximately 80% owned by ONFS and 20% owned by Security Mutual Life of New York (Security Mutual), marketing variable annuity products within New York state. The outlook for all ratings is stable. (See below for a detailed listing of the companies and debt ratings.)

The ratings reflect Ohio National's positive growth trends in its core life and annuity lines, consistently profitable operations with strong embedded earnings, excellent risk-adjusted capitalization and diverse distribution channels. The company also benefits from an efficient expense structure, broad competitive product offerings, effective asset/liability management and a disciplined approach to spread management and mortality underwriting.

Ohio National has grown its individual life insurance sales for 18 consecutive years and has enjoyed consistent sales growth in its variable annuity products. The company's increasing market penetration, efficient expense structure and strong core operating fundamentals--persistency, mortality, risk management, investment results--have contributed to its strong operating performance. Ohio National's inforce block of life insurance represents a source of strength for the group as the block incorporates strong embedded profits and contributes to its stable earnings.

Partially offsetting these strengths is Ohio National's challenge to continue increasing market share as it maintains competitive but not leading market positions in any of its core lines. Additionally, the group's consolidated financial leverage of slightly over 20% is near the upper end of the range for its current ratings, albeit reduced from years past. A.M. Best notes that interest coverage is solid at approximately seven and one-half times.

Ohio National also maintains an above average allocation to NAIC class 2 bonds (26% of invested assets, 33% of bonds) and speculative grade bonds (7% of invested assets and 8.9% of bonds) in its investment portfolio, therefore assuming a higher level of credit risk than industry peers. Although Ohio National has experienced strong growth in variable annuity (VA) sales, the profit characteristics of VAs are generally less creditworthy than ordinary life insurance due to narrower margins, secondary guarantee risks and greater sensitivity to macroeconomic changes.

In accordance with A.M. Best's methodology for rating insurance groups, NSLAC receives partial rating enhancement due to its integration with ONFS' distribution, products and systems platforms specific to variable annuities. The notching of NSLAC's ratings reflects that it does not offer Ohio National's full array of life and annuity products, it is not wholly-owned by Ohio National and its current level of operating activity does not represent a material portion of the group's consolidated revenue or earnings. A.M. Best notes that NSLAC remains well capitalized and that Ohio National has provided financial support by reinsuring one-half of NSLAC's variable annuity benefits.

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

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.