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TEXT-Fitch affirms Navy Mutual Aid Association at 'A+'
June 5, 2012 / 4:31 PM / 6 years ago

TEXT-Fitch affirms Navy Mutual Aid Association at 'A+'

 (The following statement was released by the rating agency)	
 June 5 - Fitch Ratings has affirmed Navy Mutual Aid Association's (NMAA)
Insurer Financial Strength (IFS) rating at 'A+'. The Rating Outlook is Stable.	
NMAA's IFS rating reflects the association's strong capital levels, high
quality, liquid investment portfolio, and conservative financial profile with
predictable cash flows. Product liabilities are composed of predominantly term
and universal life insurance products and no variable annuity products or
guarantees. Financial flexibility is considered adequate in respect to NMAA's
unique business profile and product portfolio.	
Fitch views NMAA's excellent persistency and consistently low expense ratios as
additional strengths. Fitch believes that NMAA's mortality experience is within
NMAA's investment portfolio is composed of 31% U.S. government-guaranteed or
government-sponsored enterprise debt. Exposure to structured securities is very
low at less than 2% of investments and consists of agency backed residential
mortgage backed securities.	
In 2011 NMAA reduced its exposure to equities by more than half its previous
levels, decreasing volatility to capital. Proceeds from equity sales were moved
to cash and equivalents pending further reinvestment.	
Portfolio yields have consistently exceeded 6% although yield on new money
investment is down as they are across the life insurance industry. NMAA
recognized sizable realized gains in the process of reducing equity exposure in
2011. Gross realized credit losses compare favorably to those of the life
industry over the 2008-2011 period.	
Rating concerns include NMAA's limited access to capital markets, and the
long-term challenge of membership growth.	
The Stable Outlook is driven by Fitch's expectations for strong capital,
consistent operating earnings driven by low cost operations, strong levels of
investment income, and moderate top line growth.	
NMAA's total adjusted capital grew 2% in 2011 to $221 million. The association
reported a risk based capital ratio of 399% at yearend 2011.	
Net operating income declined to $3.8 million in 2011 from $7 million in 2010
and $20 million in 2009 as NMAA posted increased death benefit payments and an
increase in policyholder reserves.	
NMAA has a strong niche position as a low cost provider of insurance protection
products to the United States sea services and their families. NMAA serves
active, reserve and retired members of the U.S. Navy, U.S. Marine Corps, U.S.
Coast Guard, U.S. Public Health Service, National Oceanic and Atmospheric
Administration and had total assets of approximately $2.7 billion at year-end
2011. The association is located in Arlington, VA and currently had
approximately 112,600 members and approximately $23 billion of insurance in
force at the end of 2011.	
NMAA's ratings are based in part its unique profile as a modest scale, nonprofit
institution serving a narrow customer base. Fitch believes that the
association's strategy to provide high-value products to its customers and
maintain prudent levels of reserves and capital, rather than generating stronger
earnings and higher reserving and capital levels, limits the upside range of its
IFS rating. Barring any change in these qualities, Fitch views Navy Mutual at
the upper end of that range.	
Key ratings drivers that could result in a downgrade include:	
--A decline in estimated risk based capital to below 300% company action level;	
--A significant change in war risk exposure and experience;	
--An unfavorable change in tax/regulatory status.	
Additional information is available at ''. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.	
Applicable Criteria and Related Research:	
--'Insurance Rating Methodology' (Sept. 22, 2011).	
Applicable Criteria and Related Research:	
Insurance Rating Methodology	
 (New York Ratings Team)	

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