Fitch Ratings Affs Navy Mutual Aid Association's 'AA-' Rtg.

Business Editors

CHICAGO--(BUSINESS WIRE)--Feb. 14, 2002

Fitch Ratings has affirmed the insurer financial strength rating of Navy Mutual Aid Association (NMAA) at 'AA-'. The Rating Outlook is Stable.

The rating is based upon Navy Mutual Aid Association's solid niche position as a provider of mainly interest-sensitive and term life insurance to active, reserve and retired members of the U.S. Navy, U.S. Marine Corps, U.S. Coast Guard, U.S. Public Health Service and National Oceanic and Atmospheric Administration and their families.

Fitch views as strengths NMAA's strong capital position, conservative reserving, outstanding persistency and mortality, a low expense ratio, and its focused and unwavering adherence to its mission of serving its members. Partially offsetting these strengths is a moderately higher than industry allocation to common stocks and the resulting volatility in asset values and adjusted surplus. NMAA's pays attractive crediting rates for participating policyholders' accounts and premium refunds to term policyholders funded by a combination of net operating gains and realized capital gains generated by its equity portfolio. Fitch believes management has the flexibility and discipline to adjust policyholder crediting rates when necessary and maintain strong levels of capital.

NMAA's investment portfolio has very low credit risk as 98% of bonds were investment grade at September 2001, and exposure to mortgages and real estate is less than 3% of invested assets. Bonds comprised approximately 79% of invested assets. Below investment grade bonds as a percent of net assets is well below the industry average at year-end 2001. Common stocks are currently at the low end of their normal range of between 6% and 8% of invested assets. The company's equity portfolios consisted of diversified, indexed funds which have declined in market value over the last two years in tandem with the overall decline in the broad stock markets, reducing a historical source of gains for the payment of policyholder dividends.

Fitch views NMAA's liquidity and asset liability management to be sound. While the long duration of the bond portfolio increases NMAA's interest rate risk, it is considered appropriate for the association's liability profile. As NMAA broadens its product line with the introduction annuity products in 2002, asset liability management will become increasingly important.

Navy Mutual Aid Association, which is headquartered in Arlington, Virginia, reported total admitted assets of $1.5 billion and adjusted surplus of $130.3 million at Dec. 31, 2000. The association has over 98,000 members and over $9.9 billion of insurance in force as of September 2001.

Entity/Issue/Type               Action          Rating/Outlook

Navy Mutual Aid Association
--Insurer financial strength    Affirmed        'AA-'/Stable