A.M. Best Revises Outlook to Positive for Americo Financial Life and Annuity Insurance Company and Americo Life, Inc.

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co.has revised the outlook to positive from stable and affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit rating (ICR) of “a-” of Americo Financial Life and AnnuityInsurance Company(AFL) (Dallas, TX). Concurrently, A.M. Best has affirmed the FSRs of B+ (Good) and ICRs of “bbb-” of AFL’s key life/health affiliates. The outlook for these ratings is stable. Additionally, A.M. Best has revised the outlook to positive from stable and affirmed the ICR of “bbb-”and senior debt rating of “bbb-” of AFL’s parent, Americo Life, Inc. (Americo) (Kansas City, MO). (See below for a detailed listing of the companies and ratings.)

The revised outlook reflects AFL’s favorable operating performance in recent periods, which has resulted in a considerable increase in capital and surplus and a strong risk-adjusted capital position. Additionally, Americo maintains a relatively conservative level of financial leverage, while its interest coverage remains more than adequate for its current ratings. A.M. Best also notes that the ratio of intangible assets to stockholder equity has declined noticeably in recent periods to approximately 42% and that the company’s consolidated investment portfolio has performed well since the financial crisis and is in a net unrealized gain position of over $460 million as of June 30, 2012.

Partially offsetting these positive rating factors is the substantial use of reinsurance and potential for spread compression as the majority of the company’s liabilities are interest-rate sensitive, and the crediting rates for a significant portion of AFL’s annuity business are currently at their guaranteed minimums. Furthermore, while AFL’s ordinary life sales recently have begun to rebound after a substantial decline following the financial crisis, they remain well below historical levels. A.M. Best also notes that indexed annuity sales have been the primary driver of premium growth in recent periods.

Positive rating actions could result from continued new business premium growth within AFL’s ordinary life lines while controlling its annuity sales growth and maintaining its current level of profitability and risk-adjusted capitalization.

Negative rating actions could result from aggressive indexed-annuity sales growth, an inability to profitably grow its ordinary life business or a material decline in operating performance and/or risk-adjusted capitalization.

The FSRs of B+ (Good) and ICRs of “bbb-” have been affirmed for the following life/health affiliates of Americo Financial Life and Annuity Insurance Company:

• Great Southern Life Insurance Company
• Investors Life Insurance Company of North America
• National Farmers Union Life Insurance Company
• The Ohio State Life Insurance Company

The following debt rating has been affirmed:

Americo Life, Inc.—
-- “bbb-” on $125 million 7.875% senior unsecured notes, due 2013

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 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.
Michael Adams,908-439-2200, ext. 5133
Senior Financial Analyst
michael.adams@ambest.com
or
Thomas Rosendale,908-439-2200, ext. 5201
Assistant Vice President
thomas.rosendale@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Source: A.M. Best Co.