A.M. Best Revises Outlook to Negative for Ohio National Financial Services, Inc. and Its Subsidiaries.

OLDWICK, N.J. -- A.M. Best Co. has revised the outlook to negative from stable and 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). 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. All the above companies are headquartered in Cincinnati, OH.

Additionally, A.M. Best has revised the outlook to negative from stable and affirmed the ICR of "a+" of National Security Life and Annuity Company (NSLAC) (Binghamton, NY). The FSR of A (Excellent) has been affirmed with a stable outlook. 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 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.

Concurrently, A.M. Best has revised the outlook to negative from stable and affirmed the debt rating of "a" on the outstanding surplus notes of ONLIC. A.M. Best also has revised the outlook to negative from stable and affirmed the ICR of "a-" and debt rating of "a-" on the senior unsecured notes of ONFS. (See below for a detailed listing of the companies and debt ratings.)

The revised outlook reflects A.M. Best's concern with Ohio National's exposure to equity market volatility, as reflected in declining separate account assets under management and its negative impact on profit margin and fee income. In addition, while most of the variable annuity secondary guaranteed minimum benefit riders are reinsured higher hedging costs would negatively impact earnings. Due to the equity market volatility in 2008, Ohio National increased reserves to support its variable annuity business risks, which erode its operating results and capital and surplus position. However, early 2009, Ohio National expanded hedging its unreinsured death benefit risks to prevent any further significant erosion of its capital or increase in reserves.

Ohio National also maintains a somewhat above average allocation to medium risk and speculative grade bonds in its investment portfolio, therefore assuming a higher level of credit risk as evidenced by its large amount of unrealized investment losses relative to the total adjusted capital. However, Ohio National is maintaining significant liquidity, which is more than sufficient to prevent realized losses from forced asset sales under stress scenarios. Ohio National has recorded realized losses in each of the last five years, which is consistent with its buy and hold investment strategy.

The ratings continue to recognize the positive growth trends in Ohio National's core life and annuity lines, consistently profitable operations with strong embedded earnings, excellent risk-adjusted capitalization, which included the positive impact of permitted practices for ONLIC and ONLAC in 2008, 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.

The following debt ratings have been affirmed with a negative outlook:

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 Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

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.