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FOR IMMEDIATE RELEASE
OLDWICK - DECEMBER 08, 2017 09:50 AM (EST)
A.M. Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa” for all the life insurance subsidiaries of Western & Southern Financial Group Inc. (WSFG). The subsidiaries are The Western and Southern Life Insurance Company (WSLIC), Western-Southern Life Assurance Company, Columbus Life Insurance Company, Integrity Life Insurance Company, National Integrity Life Insurance Company (Greenwich, NY) and its affiliate, The Lafayette Life Insurance Company (Lafayette Life).
Concurrently, A.M. Best has affirmed the Long-Term ICR of “a” and the Long-Term Issue Credit Rating of “a” on the $500 million 5.75% senior unsecured notes due 2033 of WSFG. The outlook of these Credit Ratings (ratings) is stable. All companies are domiciled in Cincinnati, OH, except where specified.
The ratings reflect WSFG’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its good operating performance, favorable business profile and appropriate enterprise risk management. The ratings also reflect WSFG’s favorable liquidity and strong financial flexibility given modest leverage and interest coverage.
WSFG has the strongest capitalization with a high quality of surplus, favorable GAAP and statutory earnings with some volatility. On a qualitative basis, capital is enhanced given the modest use of reinsurance, no utilization of captives and no permitted accounting practices. Additionally, the ratings recognize the diversity in WSFG’s product offerings and distribution channels with an emphasis on middle market individuals, financial institutions and asset management, which contributes to additional earnings diversification. Recently, the group has expanded its distribution to Fidelity Investments, which is expected to enhance growth in annuities and add additional market share. WSFG offers a mix of life insurance, annuities, retirement and investment products. It has good diversification in its distribution channels, which include career agents, independent agents, banks, broker dealers and other financial institutions. Finally, the ratings also recognize guarantees from WSLIC to all insurance subsidiaries and its affiliate, Lafayette Life.
Partially offsetting rating factors include operating returns that are somewhat lower than industry aggregates due in part to strong capitalization levels, moderate retention of redundant reserves and modest adjusted statutory profitability within the group’s ordinary life line. The group has high interest rate exposure as most of its earnings are continued to be driven from annuities, although investment spreads remain relatively stable. Given the concentration in annuities, there is the potential for disintermediation risk in a rapidly rising interest rate environment. However, this risk is partially mitigated by adequate surrender charge protection and modest deferred acquisition costs to equity ratios. While the overall investment portfolio is of good credit quality exposure to below investment grade bonds, equities and asset-backed securities is higher than benchmarks; however, this risk is partially offset by much lower levels of mortgage exposure. Finally, while WSFG has expanded its product footprint and improved some market positions, its overall market position in life insurance and annuities has remained relatively unchanged and it faces ongoing competition from other companies in the highly competitive U.S. life and annuity market.
This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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