A.M. Best Affirms the Ratings of Western & Southern Financial Group, Inc. and its Subsidiaries

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of “aa” of the core life insurance subsidiaries of Western & Southern Financial Group Inc. (WSFG). The subsidiaries include: 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 (Goshen, NY) and The Lafayette Life Insurance Company. All companies are domiciled in Cincinnati, OH, except where specified. All ratings recognize the unconditional guarantee of WSLIC to its subsidiaries.

Concurrently, A.M. Best has affirmed the ICR of “a” and debt rating of “a” on $500 million 5.75% senior unsecured notes, due 2033 of WSFG. The outlook for all ratings is stable.

The rating actions reflect WSFG’s strong risk-adjusted capitalization and good liquidity profile, improved statutory and GAAP operating results, diverse nature of its distribution platform with continuing expansion in the Midwestern markets and a growing base for its asset management business. WSFG recorded a significant increase in net operating earnings in 2011, due to increased investment income and lower new business strain from decreased annuity sales. WSFG’s strong risk-adjusted capitalization, as defined by Best’s Capital Adequacy Ratio, is more than sufficient to support its insurance and business risks and the organization’s capital and surplus to liabilities ratio is viewed favorably. Through organic growth and acquisitions, WSFG has developed a diverse distribution network and product portfolio to market to a variety of clients.

The organization’s consolidated GAAP equity has increased to over $6 billion, primarily due to improved operating earnings and unrealized gains from its investment portfolio. Financial leverage is viewed as modest and coverage continues to be strong.

Offsetting rating factors include the challenges WSFG faces in growing its ordinary life insurance line of business in a highly competitive environment and its elevated exposure to interest-sensitive products calculated at approximately two-thirds of total reserves. While WSFG enjoys a strong Midwest regional presence and broad distribution platform, which is supported by diverse product offerings, A.M. Best notes that the group’s overall life insurance sales and scale remain relatively small when compared to other higher rated life insurers. In addition, WSFG’s exposure to structured securities and mortgages represents an amount in excess of statutory capital and surplus, but is partially offset by strong monitoring and risk management, holdings in older vintages and mortgages with stringent underwriting standards.

The ratings for WSFG are well positioned given its strong risk-adjusted capitalization and good liquidity relative to its large interest sensitive liabilities. However, the ratings could face downward rating pressure if the organization has a trend of increasing interest-sensitive reserves as a percentage of total liabilities, heightened spread compression in its interest-sensitive products given the continuing low-interest rate environment or a sustained decline in its consolidated operating results. Positive rating actions could occur if there is a measurable shift towards profitable growth in WSFG’s life insurance premium mix and improvement in its competitive market position relative to other highly rated life insurers.

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: “Understanding BCAR for Life/Health Insurers”; “Risk Management and the Rating Process for Insurance Companies”; “Rating Members of Insurance Groups”; and “Insurance Holding Company and Debt Ratings.” 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 Company, Inc.Frank Walko, 908-439-2200, ext. 5072
Financial Analyst
[email protected]
orRaj H. Shah, 908-439-2200, ext. 5409
Assistant Vice President
[email protected]
orRachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
[email protected]
orJim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best Company, Inc.