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

AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” (Superior) of National Life Insurance Company (NLIC) (Montpelier, VT) and its wholly owned subsidiary, Life Insurance Company of the Southwest (LSW) (Addison, TX). Concurrently, AM Best has affirmed the Long-Term Issue Credit Ratings (Long-Term IRs) of “a” (Excellent) of the surplus notes of NLIC. Both companies are collectively known as National Life Group (NL Group) and 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. AM Best also has affirmed the Long-Term ICR and the Long-Term IRs of “a-” (Excellent) of NLVF. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the Long-Term IRs).

The ratings reflect NL 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).

These ratings also indicate continued favorable trends in NL Group’s balance sheet strength metrics, supported by its strongest level of risk-adjusted capitalization, which is projected to remain at that level, as measured by Best’s Capital Adequacy Ratio (BCAR). Continued strategic management initiatives have resulted in further growth of the group’s life/annuity sales, but sales for the industry could still be challenged to grow at a similar pace in the near future with economic uncertainty and its potential impact on the insurance industry’s competitive landscape. NL Group’s structured investments comprised the biggest relative investment allocation increase for the year, while commercial real estate had the largest investment allocation decline, as new fundings within the asset class have been limited.

NL Group’s NAIC risk-based capital ratio improvement has remained strong and well above regulatory requirements over the past several years. However, there has been moderate continued volatility in NL Group’s net income levels, driven by non-core earnings that reflect GAAP accounting reserving changes for indexed products, as well as short-term movement in equity markets and interest-rate curves.

NL Group has a long history of successfully targeting life insurance and annuity product solutions to the middle market segment through its growing agency force consisting of career and independent agents. Recent profitable growth has led to a further improved market position and increasing market share through its niche products, such as its offerings in the K-12 educator and indexed universal life markets. The ERM assessment of appropriate continues to reflect NL Group’s well-established governance structure, culture and risk management controls, which are continuing to evolve and grow more sophisticated.

More recently, NL Group has embarked on an offshore Bermuda reinsurance partnership with 26North Reinsurance Holdings, which provided the majority of the capital and has a majority ownership in the newly formed Bermuda reinsurer AeCe ISA, Ltd. (AeCe), with NLIC and Agam Capital (Agam) each having a minority stake. Agam provides administration and other services. LSW, a subsidiary of NLIC, has reinsured $4.9 billion of reserves at closing as part of this transaction, and will reinsure a quota share of new fixed-indexed annuity & multi-year guaranteed annuity business in 2024. The transaction is structured as coinsurance with funds withheld by LSW. AM Best will closely monitor the effects of this transaction on the whole organization as it continues to evolve in the near future.

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

NLV Financial Corporation—

— “a-” (Excellent) on $75 million 6.50% senior unsecured notes, due 2035

— “a-” (Excellent) on $200 million 7.50% senior unsecured notes, due 2033

National Life Insurance Company—

— “a” (Excellent) on $200 million 10.50% surplus notes, due 2039

— “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 use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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