A.M. Best Co. has revised the issuer credit rating (ICR) outlook to positive from stable and affirmed the financial strength rating (FSR) of C++ (Marginal) and ICR of "b" of North Carolina Mutual Life Insurance Company (NC Mutual) (Durham, NC).

The outlook for the FSR is stable.

The positive outlook on the ICR reflects A.M. Best's belief that NC Mutual will be able to reverse recent declines in its reported surplus in the near to medium term. Although profitable, surplus levels declined in 2011 and through the first quarter of 2012 on a statutory basis. However, the company has a number of fee-based initiatives, which are expected to add to reported income in 2012 and 2013. In addition, capital planning measures are expected to increase reported surplus by year-end 2012. Risk-adjusted capital measures also have improved, despite the declines in absolute capital.

Offsetting rating factors include NC Mutual's modest absolute capital levels as reflected in its low surplus position relative to insurance liabilities, some asset concentrations in its investment portfolio and a continuing trend of declining premium volume and losses in its group life insurance segment.

Positive rating actions may occur if NC Mutual is able to meaningfully expand its capital base, continue to generate positive statutory operating results and build on its plans to generate increased revenue. Negative rating actions may occur if the company's capital levels continue to decline, material investment impairments occur or operating losses re-emerge.

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 ambest.com/ratings/methodology.

A.M. Best Company is an insurance rating and information source.

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