AM Best Upgrades Credit Ratings of NLV Financial Corporation and Its Insurance Subsidiaries

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has upgraded the Financial Strength Rating to A+ (Superior) from A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “aa-” (Superior) from “a+” (Excellent) of National Life Insurance Company (NLIC) (Montpelier, VT) and its wholly owned subsidiary, Life Insurance Company of the Southwest (Addison, TX). Concurrently, AM Best has upgraded the Long-Term Issue Credit Ratings (Long-Term IR) to “a” (Excellent) from “a-” (Excellent) on the surplus notes of NLIC. Both companies are life insurance subsidiaries of NLV Financial Corporation (NLVF) (headquartered in Montpelier, VT), which is the intermediate holding company in the organization’s mutual holding company structure, and are collectively known as National Life Group (the group). AM Best has also upgraded the Long-Term ICR and the Long-Term IRs to “a-” (Excellent) from “bbb+” (Good) of NLVF. The outlooks of these Credit Ratings have been revised to stable from positive. (See below for a detailed listing of the Long-Term IRs.)

The ratings reflect National Life Group’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

The rating upgrades reflect favorable trends in National Life Group’s balance sheet strength metrics, supported by its risk-adjusted capitalization, which is projected to be at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). In addition, ongoing strategic initiatives implemented by management should help maintain a stable operating performance assessment over the intermediate term. Although the group has improved the risk profile of its investment portfolio through recent de-risking initiatives, the portfolio still remains less conservative than some of its peers. Despite challenging conditions in 2020, overall default losses and credit migrations remained limited as actual results were well below stressed scenarios. In addition, the group’s NAIC risk-based capital ratio trend has remained strong and well above company targets and regulatory requirements over the past several years. The group also performed risk-based capital stress testing scenarios as a result of the COVID-19 pandemic, which showed 2020 risk-based capital levels remained in excess of its defined risk thresholds.

The group has a long history of successful execution in targeting life insurance and annuity product solutions to the middle market segment, which it markets through a combination of career agents and a growing independent agency force. The group’s strong sales growth trends continued through year-end 2020, but could be challenged to grow at a similar pace through 2021 due to the continued effects of the COVID-19 crisis, although its use of e-application, accelerated underwriting and e-delivery processes should help. Recent profitable growth has led to an improved market position and increasing market share through its niche products, such as its offerings in the K-12 educator market and indexed universal life. The ERM assessment of appropriate is reflective of the group’s continued well-established governance structure, culture and risk management controls.

The following Long-Term IRs have been upgraded with stable outlooks:

NLV Financial Corporation—
-- to “a-” (Excellent) from “bbb+” (Good) on $75 million 6.50% senior unsecured notes, due 2035
-- to “a-” (Excellent) from “bbb+” (Good) on $200 million 7.50% senior unsecured notes, due 2033

The following Long-Term IRs have been upgraded with stable outlooks:

National Life Insurance Company—
-- to “a” (Excellent) from “a-” (Excellent) on $200 million 10.50% surplus notes, due 2039
-- to “a” (Excellent) from “a-” (Excellent) on $500 million 5.25% surplus notes, due 2068

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

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