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) (Centennial, 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 ratings reflect NWLIC’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The ratings also reflect NWLIC’s relatively diversified business profile through its domestic life, international life and annuity operating segments. NWLIC consistently has been profitable on an operating basis, although derivative accounting has resulted in some volatility on a statutory basis. The investment portfolio has a lower percentage of higher risk assets than the industry average, and robust asset-liability matching and hedging programs enhance the balance sheet profile. Additionally, A.M. Best notes that the formation of the holding company structure and a line of credit adds financial flexibility. 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 in the near term.
These strengths are offset by NWLIC’s high concentration of reserves in interest-sensitive products, elevating the risk of duration mismatches, spread compression, and in the case of its large fixed indexed annuity book, the potential volatility in the cost and efficiency of its hedging program. In addition, the company has reported a declining trend in net premiums written in recent years, resulting from the strategic reduction in annuity production, and ceasing the acceptance of new life insurance business from several of its larger international markets.
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