A.M. Best Affirms Ratings of Securian Financial Group, Inc.’s Subsidiaries
January 8, 2015 by A. M. Best
Oldwick – A.M. Best has affirmed the financial strength rating (FSR) of A+ (Superior) and the issuer credit ratings (ICR) of “aa-” of Minnesota Life Insurance Company (Minnesota Life) and its subsidiary, Securian Life Insurance Company (Securian Life). In addition, A.M. Best has affirmed the FSR of A (Excellent) and ICR of “a” of Securian Casualty Company (Securian Casualty). These subsidiaries form the core insurance operating entities of Securian Financial Group, Inc. (SFG) (Delaware), whose ultimate parent is Minnesota Mutual Companies Inc. (MMC). In addition, A.M. Best has affirmed the ICR of “a-” of SFG (an intermediate holding company under MMC) and affirmed the debt rating of “a” on $125 million 8.25% surplus notes due 2025, issued by Minnesota Life.
Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and ICRs of “a-” of the life insurance subsidiaries of SFG, American Modern Life Insurance Company and Southern Pioneer Life Insurance Company. The outlook for all ratings is stable, and all companies named above are headquartered in St. Paul, MN, except where specified.
The ratings reflect Minnesota Life’s strong capitalization levels, positively trending growth in top line revenue and earnings which continue to benefit from stable interest margins, strong persistency and consistent expense management. Additionally, the ratings reflect its diversified operating profile, with core business lines–individual, financial institutions (life and specialty property/casualty), retirement, group and asset management–that provide well balanced and complimentary sources of revenues, cash flows and earnings. The group’s enterprise risk management framework is well developed and is reflected in the diversity of its insurance product portfolio, good liquidity profile and the overall high quality of its balance sheet. SFG has modest financial and operating leverage with very strong interest coverage and a generally conservative investment philosophy, which is augmented by its product and macro hedging programs. The ratings also reflect a successful acquisition strategy, and includes the fourth quarter 2014 purchase of a majority interest in Asset Allocation Management Company, which expands its presence in asset management.
Offsetting these positive rating factors include Minnesota Life operating within the highly competitive U.S. life and annuity market and the corresponding challenges associated with maintaining sustainable and profitable growth. While Minnesota Life has enjoyed strong growth in group insurance in recent years, it will need to broaden its product line and adapt to the rapidly changing dynamics of the employee benefits marketplace. Additionally, while progress has been made in growing its non-equity sensitive business lines, SFG retains a large amount of separate account assets under management, which creates the potential for earnings volatility should equity markets decline. Finally, despite currently stable interest margins, SFG’s investment yield continues to contract, which may place pressure on interest spreads going forward.
The rating affirmations for Securian Casualty recognize its excellent level of stand-alone risk-adjusted capitalization and continued profitable earnings. In addition, A.M. Best considers Securian Casualty’s importance and growing role within the organization as it has enabled SFG to deliver a broad range of credit insurance product offerings and services to the financial institution market.
A.M. Best believes positive rating actions in the near term are unlikely. Factors that could lead to negative rating actions include loss of competitive market positions, a material decline in operating performance and/or risk-adjusted capitalization relative to A.M. Best’s expectations.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
•A.M. Best’s Liquidity Model for U.S. Life Insurers
•A.M. Best’s Perspective on Operating Leverage
•Evaluating U.S. Surplus Notes
•Rating Members of Insurance Groups
•Risk Management and the Rating Process for Insurance Companies
•Understanding BCAR for U.S. and Canadian Life/Health Insurers
•Analyzing Insurance Holding Company Liquidity
•Insurance Holding Company and Debt Ratings
•Understanding BCAR for Property/Casualty Insurers
This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best’s Ratings & Criteria Center.
A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.
