A.M. Best Affirms 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 the issuer credit rating (ICR) of “aa+” of Western & Southern Financial Group, Inc.’s (WSFG) core life insurance subsidiaries. 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 (New York) and The Lafayette Life Insurance Company (Lafayette Life) (Indiana). Concurrently, A.M. Best has affirmed the ICR of “aa-” of WSFG. Additionally, A.M. Best has affirmed the debt rating of “aa-” on $500 million 5.75% senior unsecured notes due 2033 of WSFG. The outlook for all ratings is stable. All companies are domiciled in Ohio, except where specified. All ratings recognize the unconditional guarantee from WSLIC on the subsidiaries.

The ratings reflect WSFG’s superior risk-adjusted capitalization, conservative operating profile, diverse product portfolio and distribution and consistent pre-tax operating earnings growth. The ratings also recognize the strong regional presence WSFG has built, particularly in the upper Midwest. The group's steady earnings provide strong debt service capacity to support fixed charges, particularly given its low financial leverage. With strong operating fundamentals through consolidating businesses and expense management programs, WSFG has generated stable earnings from both its protection and wealth accumulation segments, contributing to its strong capital base.

Partially offsetting these positive rating factors has been the challenges the group has had in generating meaningful new business growth in its core life and annuity product lines, the negative impact from volatile equity markets on its capital position, as well as a significant exposure to collateralized mortgage obligations (CMOs), which backs annuity reserves. The intensely competitive nature of the life insurance and financial services markets has led to a modest increase in direct life premiums, while annuity premiums have declined as a result of the low interest rate environment. In addition, A.M. Best believes that WSFG may be challenged by its geographic concentration in the Midwest and the low industry growth rates of traditional life products. In recent years, the lower return retirement savings lines have been the major and increasing contributors to growth in revenue and earnings, and competitive pressures may present challenges to grow earnings at levels commensurate with the group’s similarly rated peers. The group has experienced an overall decline in its capital levels in 2008, due to significant erosion in the market value of certain concentrated equity holdings and writedowns on certain fixed income instruments. However, A.M. Best believes that despite these declines, WSFG remains well capitalized for the current ratings.

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Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.