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Fitch Assigns 'A+' IFS Rating to Sammons Financial Group, Inc. Subsidiaries; Outlook Stable
May 2, 2017 / 9:07 PM / 7 months ago

Fitch Assigns 'A+' IFS Rating to Sammons Financial Group, Inc. Subsidiaries; Outlook Stable

(The following statement was released by the rating agency) CHICAGO, May 02 (Fitch) Fitch Ratings has assigned 'A+' Insurer Financial Strength (IFS) ratings to Midland National Life Insurance Company (MNL) and North American Company for Life and Health Insurance (NACOLAH). Fitch has also assigned a 'A-' Issuer Default Rating (IDR) to Sammons Financial Group, Inc. (SFG). SFG is the parent company of MNL and NACOLAH. The Rating Outlook is Stable. KEY RATING DRIVERS The ratings assigned to SFG and its insurance operating subsidiaries reflect the organization's strong business profile, low financial leverage, very strong statutory capitalization and strong operating profitability supported by strong investment performance. These positives are partially offset by SFG's above average asset and interest rate risk given the company's focus on spread-based products, which incorporate minimum rate guarantees, as well as the company's substantial securities lending activities. SFG's strong business profile reflects its position as a top 30 company in terms of both assets and statutory capital. The company's size provides it with advantages relative to smaller competitors, including administrative efficiencies, access to distribution and diversification of risk. SFG maintains a solid competitive position in its primary products as a top 10 writer of individual life insurance in 2016, a top 10 writer of individual fixed annuities and a top 15 writer of individual annuities overall. Fitch considers SFG's capitalization to be very strong. The company reported a combined RBC ratio of 426% at year-end. SFG's financial leverage was a very low 4% at Dec. 31, 2016, resulting in very strong debt service capabilities. While future debt issuance to partially fund growth is possible, Fitch expects the company to maintain relatively low financial leverage over the intermediate term. Fitch considers SFG's operating profitability to be strong and currently in line with that of similarly rated peers. The company's earnings profile benefits from good relative earnings stability, particularly during the financial crisis, driven by strong investment yields, good spread management and growing assets under management. Fitch believes that SFG has managed spread compression well in recent years by managing crediting rates and selling products with lower minimum guarantees. While viewing SFG's corporate bond quality as strong, Fitch also considers the company's asset allocation to be significantly underweight corporate bonds and significantly overweight asset-backed securities and municipal bonds. Fitch takes a cautious view of the company's overweight position in asset-backed securities, which has generated significant losses for the industry over the past decade. However, SFG largely avoided such losses and continues to earn an outsized yield due largely to this asset allocation. RATING SENSITIVITIES Key rating triggers that could lead to an upgrade include: --Enhanced business profile including reduced proportional exposure to spread-based products; --Sustained capital strength including low operating leverage and high capital quality; --Reduction in allocation to structured securities and the size of the company's securities lending program. Key rating triggers that could lead to a downgrade include: --Prism score below 'Very Strong'; --Risky asset ratio above 100%; --Increased volatility in earnings; --Financial leverage ratio in excess of 15%. FULL LIST OF RATING ACTIONS Fitch has assigned the following ratings: Midland National Life Insurance Company North American Company for Life and Health Insurance --IFS 'A+'. Sammons Financial Group, Inc. --Long-term IDR at 'A-'; --7.00% senior unsecured notes due Oct. 15, 2043 'BBB+'. The Rating Outlook is Stable. Contact: Primary Analyst Bradley Ellis, CFA Director +1-312-368-2089 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Secondary Analyst Douglas R. Baker Associate Director +1-312-368-3207 Committee Chairperson Martha M. Butler, CFA Senior Director +1-312-368-3191 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: hannah.james@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. 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