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OLDWICK, N.J., August 10, 2021--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of "a" (Excellent) of National Western Life Insurance Company (NWLIC) (Centennial, CO). Concurrently, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of "a-" (Excellent) of Ozark National Life Insurance Company (Ozark) (Kansas City, MO). In addition, AM Best has affirmed the Long-Term ICR of "bbb" (Good) of National Western Life Group, Inc. (headquartered in Austin, TX) [NASDAQ:NWLI], the parent holding company of NWLIC and Ozark. The outlook of these Credit Ratings (ratings) is stable.
The ratings of NWLIC reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The ratings also reflect NWLIC’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as its consistent GAAP operating earnings, although derivative accounting has resulted in some earnings volatility on a statutory accounting basis.
These strengths are offset by NWLIC’s high concentration of reserves in interest-sensitive products, elevating the risk of duration mismatches and spread compression. NWLIC has taken steps to reduce this risk, ceding about $1.7 billion of statutory reserve liabilities to Prosperity Life Assurance Ltd. on a coinsurance with funds withheld basis in December 2020. Although premiums increased last year, the company has experienced a declining trend in net premiums written in recent years, driven by a reduction in annuity production, and a shift in strategy a few years ago that saw NWLIC cease issuing new life insurance business in international markets. Despite this move, international markets still represent a significant portion of the group’s premiums, although they will run off over time. NWLIC intends to focus on the U.S. annuity and life insurance marketplace.
The ratings of Ozark reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, limited business profile and appropriate ERM.
Ozark’s existing business model, which is focused primarily on selling simplified ordinary life insurance products to the middle market through its captive agent channel, has faced challenges during COVID-19. Ozark’s historically stable earnings pattern has continued since NWLIC’s acquisition. AM Best will continue to monitor the execution of Ozark’s integration with NWLIC, particularly with respect to integration of its risk management framework within NWLIC.
The holding company assessment for NWLIC is viewed as neutral with no financial or operating leverage.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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