Printer Friendly

A.M. Best Affirms Ratings of NLV Financial Corporation and Its Subsidiaries; Revises Issuer Credit Rating Outlook to Positive.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a" of National Life Insurance Company (NLIC)(Montpelier, VT) and its wholly owned subsidiary, Life Insurance Company of the Southwest (Dallas, TX) (together, known as National Life). These companies are the insurance subsidiaries of NLV Financial Corporation (NLVF) (Montpelier, VT), which is the intermediate holding company in the organization's mutual holding company structure.

Concurrently, A.M. Best has affirmed the ICR of "bbb" and senior debt ratings of "bbb" of NLVF. A.M. Best also has affirmed the debt rating of "bbb+" on $200 million 10.50% surplus notes, due 2039 of NLIC. The outlook for the ICRs and debt ratings has been revised to positive from stable, while the outlook for the FSR is stable. (See below for a detailed listing of the debt ratings.)

The revised outlook for the ICRs and debt ratings primarily reflects National Life's favorable financial trends. After faring better in 2008 than many of its peers and the industry in general, National Life recorded full-year 2009 GAAP and statutory earnings of $72.3 million and $40.4 million, respectively. National Life's results have continued to trend positively as GAAP and statutory earnings have been $60.5 million and $52.5 million, respectively, for the first half of 2010. In addition, National Life's risk-adjusted capital was strengthened by its 2009 surplus note issuance, and the group has maintained its strong capitalization through its solid 2010 earnings performance. A.M. Best notes that National Life experienced a below average level of investment losses during the 2008-2009 financial crisis, and investment impairments have been minimal for the first half of 2010.

The affirmation of National Life's ratings recognizes its good operating performance, continued conservative risk profile and diverse distribution channels. The company also benefits from its competitive positions in the indexed universal life (UL) insurance and 403(b) indexed annuity markets as well as its good expense management.

National Life ranked third in industry sales for indexed UL and also was a top 10 producer of indexed annuities in 2009. Mutual fund sales by National Life's investment management affiliate, Sentinel Investments (Sentinel), also have been quite strong, with consecutive years of record sales. National Life's investment portfolio--which is currently in a net unrealized gain position of approximately $1.2 billion--is conservatively managed, with limited exposure to structured securities other than approximately $250 million of commercial mortgage-backed securities. All residential mortgaged-backed securities held by National Life are agency-backed and rated triple-A without exposure to Alt-A or subprime collateral. In addition, National Life continues to exercise discipline in product design, choosing not to compete aggressively in the UL no-lapse guarantee market or to offer living benefit guarantees on its variable annuities.

National Life's focus on indexed products exposes its earnings to modest equity market risk. During 2008, NLVF's pre-tax GAAP operating earnings decreased over 40% from the previous year's period, primarily due to the impact of the equity market decline on earnings generated by National Life's indexed product portfolio and Sentinel's asset management business. While the surplus note issuance has increased GAAP financial leverage to approximately 23% (excluding other comprehensive income), it remains within A.M. Best's guidelines for the company's current ratings. GAAP interest coverage, at least in the near term, will be pressured by the additional costs to service the new debt securities. However, A.M. Best notes that the group's coverage ratio is supported by over $60 million of deployable capital at NLVF.

The following debt ratings have been affirmed:

NLV Financial Corporation --

-- "bbb" on $75 million 6.50% senior unsecured notes, due 2035

-- "bbb" on $200 million 7.50% senior unsecured notes, due 2033

The principal methodology used in determining these ratings is Best's Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Life and Health Insurers"; "Rating Members of Insurance Groups"; and "A.M. Best's Ratings & the Treatment of Debt." Methodologies can be found at

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
COPYRIGHT 2010 Business Wire
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2010 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:Business Wire
Date:Oct 26, 2010
Previous Article:C.W. Driver Tapped for Three Cedars-Sinai Medical Center Projects.
Next Article:Research and Markets: Commercial Construction in Saudi Arabia: Market Databook to 2014.

Terms of use | Copyright © 2018 Farlex, Inc. | Feedback | For webmasters