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Standard & Poor's: American Family Life Insurance Co. Ratings Lowered to 'A+' From 'AA-'; Outlook Stable.



NEW YORK New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of
 -- Credit Rating:A+/Stable/--

On Aug. 18, 2004, Standard & Poor's Rating Services lowered its counterparty Counterparty

The other participant, including intermediaries, in a swap or contract.
 credit and financial strength ratings on American Family American Family is a photographic artwork exhibition by RenĂ©e Cox. See also
  • An American Family, a 1973 documentary broadcast on PBS
  • , a 2002-2004 PBS drama starring Edward James Olmos and Constance Marie.
 Life Insurance Co. (AFLIC) to 'A+' from 'AA-'. The outlook is stable.

The ratings on AFLIC reflect its strategic importance as the core life insurance and annuity operations of its ultimate parent, personal lines property/casualty insurer American Family Mutual Insurance Co. (AFM (Atomic Force Microscope) A device used to image materials at the atomic level. AFMs are used to solve processing and materials problems in electronics, telecom, biology and other high-tech industries. ); strong business position; very strong earnings; extremely strong capital adequacy and liquidity; and strong investments. Partially offsetting these strengths are AFLIC's rising investment risks, sales growth rates Growth Rates

The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures.

Notes:
Remember, historically high growth rates don't always mean a high rate of growth looking into the future.
 that lag those of the industry, and inconsistent execution of strategies to improve AFLIC's modest penetration of property/casualty households.

Outlook

Standard & Poor's expects AFLIC to remain a core member of the American Family Mutual Insurance Group. On a GAAP GAAP

See: Generally Accepted Accounting Principles


GAAP

See generally accepted accounting principles (GAAP).
 basis, premium income is expected to increase 3% in 2004 and 6% in 2005. Although individual life insurance sales are expected to grow by 3%, which is on par with historical levels, sales of variable products will increase more rapidly because of more agents becoming licensed to sell these products.

Penetration within its property/casualty agency force and customer household base is expected to remain at 8%. Operating performance is expected to remain extremely strong, with GAAP pretax income pretax income

Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods.
 of $58 million-$60 million and statutory pretax income exceeding $50 million in 2004. Capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets.  is expected to remain extremely strong.

Major Rating Factors

--Business position. AFLIC is considered core to AFM because it serves the life insurance and annuity needs of AFM's property/casualty customer households, and its products are exclusively distributed by AFM's multi-line property/casualty agents. AFLIC depends on, and benefits from, AFM's business position as the 16th-largest project/casualty insurer in the U.S., operating primarily in midwestern states. Penetration of AFM's property/casualty customer households, however, is modest and barely improving.

--Operating performance. AFLIC maintains an extremely strong GAAP earnings adequacy ratio of 325%, as measured by Standard & Poor's model.

--Capital adequacy. The combined group, AFM and AFLIC, maintains a very strong capital adequacy ratio Capital adequacy ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR)[], is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss.  of 178%. On a stand-alone basis, the capital adequacy ratio for AFLIC was 357% at year-end 2003.

--Investments. Investments are viewed as strong and generally managed conservatively, but the company is incrementally increasing its risks to support returns.

--Liquidity. Liquidity remains extremely strong, as demonstrated by a Standard & Poor's liquidity ratio of 307% at year-end 2003.
Ratings List

                                     TO             FROM

American Family Life Insurance Co.
  Counterparty credit rating         A+/Stable/--   AA-/Negative/--
  Financial strength rating          A+/Stable      AA-/Negative



Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar A set of buttons or graphic images typically in a row or column used as a central point that link you to major topic sections on a Web site. If the navigation bar is a single graphic image with multiple selections, it is known as an imagemap. See imagemap. , select Find a Rating, then Credit Ratings Search.
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Publication:Business Wire
Date:Aug 18, 2004
Words:478
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