OLDWICK, N.J.–(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” 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-” of Ozark National Life Insurance Company (Ozark) (Kansas City, MO). In addition, AM Best has affirmed the Long-Term ICR of “bbb” 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 categorizes 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. As a result, NWLIC’s operating results may be impacted negatively by continued low interest rates. For NWLIC’s large fixed-indexed annuity book, there is potential volatility in the cost and efficiency of its hedging program. In addition, the company has reported a declining trend in net premiums written in recent years, resulting from the reduction in annuity production, and ceasing the acceptance of new life insurance business from its international markets.
The ratings of Ozark reflect its balance sheet strength, which AM Best categorizes 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 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 its acquisition by NWLIC. AM Best will continue to monitor Ozark’s strategic value to NWLIC and the opportunities it presents, along with the execution of its ongoing integration.
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