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TEXT-Fitch affirms Minnesota Life Insurance Co rating
June 5, 2012 / 7:52 PM / 5 years ago

TEXT-Fitch affirms Minnesota Life Insurance Co rating

 (The following statement was released by the rating agency)	
 June 5 - Fitch Ratings has affirmed at 'AA-' the Insurer Financial Strength
(IFS) ratings of Minnesota Life Insurance Company (Minnesota Life)
and its subsidiary, Securian Life Insurance Company. Fitch also affirmed 	
the rating on Minnesota Life's surplus notes at 'A'. The Rating Outlook is 	
Stable.	
	
The rating affirmation reflects Minnesota Life's strong balance sheet 	
fundamentals and conservative risk profile, partially offset by moderately weak 	
earnings relative to similarly rated peers.	
	
Minnesota Life's strong balance sheet fundamentals reflect the company's solid 	
capitalization, low operating leverage, and low financial leverage. The 	
company's risk-adjusted capitalization, which is a key factor supporting the 	
company's ratings, remained strong and stable in 2011. The company reported a 	
risk-based capital (RBC) ratio of 518% of the company action level at Dec. 31, 	
2011.	
	
In addition to the company's strong risk-adjusted capitalization, Minnesota 	
Life's solid balance sheet fundamentals are supported by its low statutory 	
operating leverage of 4.6x as measured by adjusted liabilities to total adjusted	
capital, as well as low financial leverage of approximately 4% on a GAAP basis.	
	
Fitch notes that Minnesota Life's liquidity profile continues to be very 	
favorable. The company's results benefit from its large, investment-grade, 	
publicly traded bond portfolio and stable liability structure.	
	
Minnesota Life's conservative risk profile reflects balanced, diversified 	
sources of revenue that serve to moderate earnings volatility, although growth 	
in fee income related to capital market performance could add further volatility	
in the future. While the company's product lines have produced below average 	
combined profitability relative to similarly rated peers, Fitch acknowledges 	
that the company's products are reflective of management's mutual insurance 	
company philosophy. Fitch also takes a favorable view of Minnesota Life's high 	
quality career agency distribution channel and strong technology-based service 	
platform, which Fitch considers to be beneficial to its group life and 	
retirement services product lines.	
	
Fitch anticipates Minnesota Life to report improving near-term operating 	
profitability, driven primarily by growing premium and asset-based fee income 	
and relatively stable investment income. Over the course of 2012, Fitch would 	
expect the company's profitability as measured by GAAP-based return on equity to	
be between 7% and 7.5%. In addition, Fitch believes that intense market 	
competition will continue to challenge the company in its efforts to generate 	
profitable top line growth over the next year.	
	
Minnesota Life, the primary operating subsidiary of Securian Financial Group, is	
headquartered in St. Paul, Minnesota and reported total admitted assets of 	
approximately $27.3 billion and capital and surplus of $2 billion at March 31, 	
2012.	
	
The key rating triggers that could result in an upgrade include: --Sustained 	
strengthening of capitalization, including a company action level risk-based 	
capital (RBC) ratio above 600% with strong capital quality;	
	
--Sustained strengthening of financial results, including a GAAP operating 	
return on equity of 10% or higher.	
	
The key rating triggers that could result in a downgrade include:	
	
--Significant deterioration in financial results that include sustained GAAP 	
operating return on equity below 4%;	
	
--A sustained decline in the company's RBC ratio to a level below 450% and an 	
increase in financial leverage above 15% as measured by debt-to-total capital.	
	
Fitch affirms the following ratings with a Stable Outlook:	
	
Minnesota Life Insurance Company	
--IFS at 'AA-';	
--Issuer Default Rating at 'A+';	
--$120 million Rule 144a surplus notes 8.25% due 2025 at 'A'.	
	
Securian Life Insurance Company	
--IFS at 'AA-'.	
	
 (Caryn Trokie, New York Ratings Unit)	
 

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