Annuity FYI Blog

According to a company press release, Kansas City Life Insurance Company is stable and remains strong.  In “A.M. Best Affirms Ratings of Kansas City Life Insurance Company and Its Subsidiaries,” their financial strength rating of A (Excellent) and their issuer credit rating of “a” were affirmed.  Kansas City Life Insurance Company’s subsidiary, Sunset Life Insurance Company of America, also had its issuer credit rating of “a” affirmed.  The company’s subsidiary Old American Insurance Company had its outlook increased from stable to positive and its financial strength rating of B++ (Good) and issuer credit rating of “bbb+” affirmed.

Kansas City Life sells life insurance, variable and fixed annuities, and group accident, health and life insurance products.  Their fixed annuity sales increased significantly, which helped to offset a decrease in the sales of ordinary life insurance products.  A.M. Best recognizes a challenging environment ahead for Kansas City Life as market conditions decrease for fixed annuities and life and group insurance products.  Subsidiary Old American’s positive outlook is based on its recent new business sales and excellent opportunities for growth based on an increasing market of seniors.

Ohio National will keep its ‘A+ Superior’ rating from A.M. Best, according to an Ohio National Financial Services news release.  The rating is based on the strength of their balance sheet, their business profile, and their operating performance.  This is the second to highest rating on A.M. Best’s 16-part scale.  Not only did Ohio National receive this ‘A+ Superior’ strength rating, but their rating outlook was upgraded to ‘stable’.  In a review of the company’s 2009 finances and operations, Ohio National was found to have some of the best annuities, as well as “strong risk-adjusted capitalization, positive net operating gains in 2009, and the improved position of its investment portfolio.”  They also had some strong increases from 2009 to the first quarter of 2010.

The other major financial rating companies also praised Ohio National’s financial strength this past April.  Standard & Poor’s reaffirmed their ‘AA’ (very strong) rating for the company’s ability to pay out claims.  This rating is S & P’s third-highest out of their 21-point scale.  Moody’s Investors Service maintained Ohio National’s ‘A1′ rating for insurance financial strength.  The ratings for Ohio National’s financial strength and ability to pay claims have not changed since 1991, which shows the company’s rock solid stability.  National Security Life and Annuity Company, Ohio National’s New York subsidiary offering variable annuities, received an ‘A Excellent’ rating which is the third highest possible.

In a press release from A.M. Best Company, they affirmed Nationwide’s financial strength ratings of A+ and aa-.  In “A.M. Best Affirms Ratings of Nationwide Financial Services, Inc. and Its subsidiaries; Outlook Negative,” the ratings are summarized.  Nationwide Financial Services, Inc., owned by Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company, and its subsidiaries operate out of Columbus, Ohio.  Subsidiaries Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company had affirmed financial strength ratings of A+ (Superior) and issuer credit ratings of aa-, partially due to sales of their best annuities.  The parent company’s issuer credit rating of “a-” and all of its debt ratings were also affirmed.  According to A.M. Best, the outlook is negative for all of Nationwide’s ratings.

Nationwide’s business profile is diverse with many product lines, has wide-ranging brand recognition and a leading position in the market of public retirement plans.  Their net flows in retirement and individual annuities are stable and improving.  Their financial leverage is within the guidelines judged by A.M. Best.  Some factors offsetting the ratings include a large exposure to mortgages, mortgage-backed securities and bonds that are below investment grade.  While there are still moderate levels of impairments going forward due to these factors and an industry hit hard with the economy, they have been able to combat the impairments with a decline in individual annuity outflows, mainly due to variable annuities, and good net flows in the public 457 retirement market.

Jackson National Life Insurance Company had record sales and net income in 2009, according to Business Wire press release “Jackson(R) Announces Record Sales and Record Profit in 2009.”  With sales and deposits of $15.2 billion, Jackson saw an 8% increase from 2008.  Their net income of $670 million was a complete turnaround from a $1 billion loss in 2008.  Although the financial market was still a challenging one, Jackson recorded their highest sales and net income in the history of the company.  Variable annuities accounted for $10 billion of their 2009 sales, an increase of $3.5 billion from the previous year.  Jackson’s fixed index annuities sold $2.2 billion, which was an increase of more than 100% from 2008.  While traditional deferred fixed annuity sales decreased from 2008, they still accounted for $1.6 billion in sales.

Ratings from all four financial strength rating companies have remained strong over the past seven years.  A.M. Best rates Jackson an A+(superior), Standard & Poor’s and Fitch Ratings both rate them an AA(very strong), and Moody’s Investor Services Inc. gives Jackson an A1(good) rating.  These strong ratings are earned in part by Jackson’s top annuity sales rankings in 2009.  They had 5.9% of the market share in total annuity sales which put them in 4th place.  They were also 4th in new sales of variable annuities, giving them a market share of 8.1%.  A market share of 7.5% in sales of fixed index annuities gave Jackson their third 4th place ranking.  While they dropped in ranking for fixed annuity sales from 2008, it was a planned move to preserve the company’s capital.

From a press release on Reuters, “A.M. Best Affirms Ratings of Symetra Financial Corporation and Its Subsidiaries.”  Symetra Life Insurance Company out of Bellevue, WA and its subsidiary, First Symetra National Life Insurance Company of New York, received a financial strength rating of A (excellent) and issuer credit ratings of a+ from A.M. Best Company.  All of the ratings issued for Symetra are considered to be stable going forward.

The company’s liquidity is solid as is their risk-adjusted capital position.  All four of Symetra’s business segments maintain consistent operating profitability and they continue to grow despite difficult economic conditions.  These reasons along with the fact that Symetra carries significantly less asset risk on its balance sheet than peers with similar financial ratings, helped to determine their A.M. Best rating.

Symetra is challenged to maintain its strong financial ratings despite a short list of factors that could throw them off track.  Current economic conditions, a heavy concentration in product lines that are spread-based or otherwise commoditized, a large number of immediate annuities and structured settlements that expose them to reinvestment risk, and some other risks are being watched closely.  Since 90% of Symetra’s product sales in the first half of 2009 were from fixed annuities, they are closely managing the asset and liability duration match that has improved their cash flow in the past to keep their excellent rating.