Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
OLDWICK, N.J.--(BUSINESS WIRE)--
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 ofSammons Enterprises,
Inc. (SEI) and are jointly referred to as the Sammons Financial
Group (SFG). The outlook for all ratings is stable.
The rating actions reflect the continuation of SFG’s favorable sales
trends, positive net flows and overall strong operating performance. In
addition, the solid investment returns generated from a higher
allocation of structured fixed-income securities has enabled the group
to maintain healthy interest spreads. The ratings also recognize SFG’s
sound capitalization and targeted distribution strategy, which has
facilitated organic growth. In 2011, SFG established a new business
line, Sammons Retirement Solutions, which will look to distribute
retirement-oriented products such as mutual funds and variable annuities
through broker-dealers and their financial advisors. SFG’s ratings
reflect its strong business profile as a leading producer of
fixed-indexed annuities (FIA), its effective FIA hedging program and the
benefits of SEI’s unique ownership structure through an Employee Stock
Ownership Plan Trust.
Partially offsetting these positive rating factors are the challenges
SFG faces in further diversifying its operating profile in the
competitive U.S. life insurance market and managing its
interest-sensitive liabilities through the ongoing low interest rate
environment. SFG continues to work on expanding its distribution
platform and further product refinements to provide more balance in its
results. Additionally, there is the potential for impairments given
moderately higher allocations to riskier assets. The investment
portfolio is weighted towards structured investments and a growing
percentage of private placements, which increase risk and negatively
impact liquidity. However, through the active management of portfolio
manager Guggenheim Partners Asset Management, LLC (an affiliated
company), SFG has consistently generated above-average returns, which
have benefited product margins despite low interest rates. A.M. Best
notes that these returns come with somewhat increased risk, lower
liquidity and the potential for higher credit impairments.
Capitalization remains sound and continues to be supported by both
organic earnings and increased utilization of reinsurance transactions.
A.M. Best believes that SFG is well positioned at its current ratings.
Factors that could have a negative impact on the outlook and/or ratings
include increased impairments from additional investment risk, a
material decline in risk-adjusted capital or a change in business
profile that would increase exposure to interest-sensitive product lines.
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. Key criteria
utilized include: “Risk Management and the Rating Process for Insurance
Companies”; “Understanding BCAR for Life/Health Insurers”; “A.M. Best’s
Liquidity Model for U.S. Life Insurers”; and “Rating Members of
Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
A.M. Best Co.Ken Johnson, CFA, 908-439-2200, ext. 5056Senior
Mirabella, CPA, CFA, 908-439-2200, ext. 5892Managing Senior
Morrow, 908-439-2200, ext. 5378Senior Manager, Public Relationsrachelle.firstname.lastname@example.orgJim
Peavy, 908-439-2200, ext. 5644Assistant Vice President, Public
Source: A.M. Best Co.