OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” of National Western Life Insurance Company (NWLIC) (Denver, CO). Concurrently, A.M. Best has affirmed the Long-Term ICR of “bbb” of National Western Life Group, Inc. (headquartered in Austin, TX) [NASDAQ:NWLI], the parent holding company of NWLIC. The outlook of these Credit Ratings (ratings) is stable.
The rating affirmations reflect NWLIC’s relatively diversified business profile through its domestic life, international life and annuity operating segments. Furthermore, the company consistently has reported positive operating earnings, although derivative accounting has resulted in some volatility on a statutory basis. A.M. Best views NWLIC’s risk-adjusted capitalization as strong for its liability profile, supported by a lower risk investment portfolio and enhanced by robust asset-liability matching and hedging programs. Additionally, A.M. Best notes that the formation of the holding company structure adds financial flexibility and reduces the capital requirement of the non-insurance affiliates. A.M. Best also notes that currently there is no debt outstanding at either the operating company or the holding company, and no debt issuances are anticipated over the near term.
Partially offsetting these positive rating factors is NWLIC’s concentration of reserves in interest-sensitive products, elevating the risk of duration mismatches and spread compression in the low interest rate environment.
The company has reported a declining trend in net premiums written in recent years, resulting from the strategic reduction in annuity production, ceasing the acceptance of business from several of its larger international markets and the impact of the Department of Labor’s regulatory update impacting NWLIC’s indexed annuity block. Additionally, by reducing the number of international markets from which it accepts business, the diversification benefit provided by this segment is somewhat diminished.
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