A.M. Best Affirms Ratings of Sammons Financial Group Members
May 30, 2013 by Best's News Service
OLDWICK, N.J. – A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) and issuer credit ratings of “aa-” of Midland National Life Insurance Company (Midland National) and North American Company for Life and Health Insurance (North American) (both domiciled in Des Moines, IA). Midland National and North American are the key life/health insurance subsidiaries of Sammons Enterprises, Inc. (SEI) and are referred to as the Sammons Financial Group (SFG). The outlook for all ratings is stable.
The rating actions reflect SFG’s strong operating performance, which has contributed to a considerable increase in its capital and surplus in recent periods, as well as its solid risk-adjusted capital position. Additionally, the ratings reflect the increase in SFG’s ordinary life sales and its established position in its core fixed-indexed annuity business. In an ongoing effort to broaden its product portfolio, SFG established Sammons Retirement Solutions in 2011, which distributes retirement-oriented products such as mutual funds and variable annuities through independent broker-dealers. A.M. Best also notes SFG’s well managed investment portfolio, which has generated above-average returns, enabling the group to maintain targeted interest spreads despite the current low interest rate environment.
Partially offsetting these positive rating factors is the group’s concentration in spread-based liabilities as annuities comprise roughly 75% of SFG’s overall reserves. While A.M. Best acknowledges the group’s effort to diversify its current mix of business, the majority of SFG’s reserves are subject to guaranteed minimum interest rates. SFG also maintains a relatively high exposure to structured securities and has significantly increased its holdings in private placements and commercial mortgage loans in recent periods, which increases risk and negatively impacts liquidity. However, through the active management of its portfolio by Guggenheim Partners Investment Management, LLC (an affiliated company), SFG has experienced only a modest level of overall asset impairments. Moreover, SFG’s investment portfolio is currently in a substantial unrealized gain position.
A.M. Best believes that SFG is well-positioned at its current ratings. Factors that could have a negative impact on the ratings and/or outlook include a material increase in asset impairments, a considerable decline in risk-adjusted capital or continued reliance on spread-based earnings if diversification strategies are unsuccessful.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at http://www.ambest.com/ratings/methodology. BN-NJ-05-29-2013 1637 ET #