OLDWICK, NJ–(BUSINESS THREAD)–AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa-” (Superior) for Midland National Life Insurance Company ( Midland National) and North American Company for Life and Health Insurance (North America) (both domiciled in West Des Moines, IA). In addition, AM Best has affirmed the long-term ICR of “a-” (Excellent) and the long-term issuance credit ratings (long-term IRs) of Sammons Financial Group, Inc. (Delaware). Additionally, AM Best has affirmed Sammons Financial Group Global Funding’s Long-Term ICR of ‘aa-‘ (Outperform). The outlook for these credit ratings (ratings) is stable. Sammons Financial Group, Inc. is an intermediate holding company of Midland National and North American, and is indirectly owned by Sammons Enterprises, Inc. Midland National and North American, the group’s main life and health insurance subsidiaries, are collectively called Sammons Financial. Group (SFG). (See below for a detailed list of long-term IRs).
The ratings reflect the strength of SFG’s balance sheet, which AM Best considers very strong, as well as its strong operating performance, favorable business profile and adequate enterprise risk management (ERM).
SFG maintains a very strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), albeit below historical levels due to a significant increase in annuity sales in 2020 and a strategic decision to purchase lower-rated corporate bonds in recent periods. Historically, the overall strength of the balance sheet has been supported by increasing levels of capital and surplus due to retained earnings, albeit somewhat volatile, and capital contributions from its parent. In addition, SFG maintains very good liquidity and strong cash flows from operations, as well as redemption charge protection on most of its current annuities. The group also has good financial flexibility with proven access to capital markets if needed and access to the Federal Home Loan Bank. SFG maintains strong interest coverage ratios and leverage remains within AM Best guidelines for its current ratings.
SFG benefits from a diverse distribution platform, including personal production agents, independent marketing organizations, brokers and banks, as well as credit unions. In addition, SFG has increased its focus and expansion into the registered investment advisory channel in recent periods. The group also offers a wide range of product offerings with generally favorable market positions in its core business lines and has recently entered the pension risk transfer market. This diversification, along with historic investments in digital capabilities, enabled the company to increase premiums significantly during the COVID-19 pandemic. However, AM Best notes that annuity sales have fluctuated over the past five years due to the low interest rate environment and a focus on capital management. SFG maintains an extensive ERM program that continuously evolves and is proportional to its risk profile.
While SFG maintains very strong balance sheet metrics, AM Best notes that the use of surplus notes and captive financing solutions, as well as the recent establishment of a Bermuda-based reinsurance subsidiary in order to leverage capital efficiency reduces the overall quality of capital. . SFG has also strategically reduced the overall credit quality of its general account investment portfolio in recent periods, although it remains well within industry averages. AM Best notes that SFG had only a modest amount of investment impairments in the most recent period after experiencing a somewhat high level of impairment in the previous year. Investment losses were mainly limited to airline securitizations in its portfolio of asset-backed securities and its investments in the energy sector, two other areas affected by the COVID-19 pandemic. SFG has been reducing its exposure to asset-backed securities in recent periods, and AM Best does not expect significant deterioration in the near term.
The following long-term IRs with a stable outlook have been confirmed:
Sammons Financial Group, Inc.:
— “a-” (Excellent) on $500 million 4.75% senior unsecured notes due 2032
— “a-” (Excellent) on $850 million 3.35% senior unsecured notes due 2031
— “a-” (Excellent) on USD 250 million 7% senior unsecured notes due 2043
— “a-” (Excellent) USD 500 million 4.45% senior unsecured fixed rate, due 2027
This press release relates to the credit ratings that have been published on AM Best’s website. For all rating information relating to the release and relevant disclosures, including details of the office responsible for issuing each of the individual ratings referred to in this release, please see AM Best. Recent qualification activity Web page. For additional information on the use and limitations of credit rating opinions, see Best Credit Ratings Guide. For information on the appropriate use of Best credit ratings, Best performance assessments, Best credit pre-assessments and AM Best press releases, see Guide to proper use of Best ratings and reviews.
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 more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.amest.com.
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