A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of "a" of National Western Life Insurance Company (NWL) (Denver, CO) [NASDAQ:NWLI]. The outlook for both ratings is stable.

The affirmation of the ratings reflects NWL's consistently favorable operating results, which have led to increases in statutory capital, consolidated stockholders' equity and risk-adjusted capitalization. NWL maintains a relatively diverse business profile, offering primarily equity-indexed annuities within the United States and equity-indexed universal life domestically and to residents of international countries. International sales are generated from applications submitted by residents of Central and South America, the Caribbean, Eastern Europe, Asia and the Pacific Rim. A.M. Best notes that NWL mitigates the added risk of international exposure by accepting applications to its Texas office from foreign nationals in upper socioeconomic classes and by denominating policies in the U.S. dollar. Furthermore, A.M. Best views the company's risk management procedures favorably, proactively mitigating and hedging its primary risk exposures, including changes to interest rates and duration mismatches, equity market volatility, currency fluctuations and sovereign risks.

Partially offsetting these positive rating factors is NWL's large exposure to interest sensitive liabilities, due to growth in annuities and equity-indexed life products. NWL mitigates the risk of spread compression through a well-matched fixed income portfolio and active management of crediting rates. However, a continued low interest rate environment could negatively impact the company's operating results. Furthermore, the domestic life market has been challenged to maintain sales growth and has recorded large statutory losses and just modest GAAP earnings, partially offsetting the profitability provided by other lines of business. A.M. Best notes that the company could be challenged to sustain its historical operating performance due to competition from larger companies with substantial financial resources and marketing depth, as well as increased expense strains associated with premium growth.

A.M. Best believes positive rating actions are unlikely in the near term to medium term. NWL's ratings may face downward pressure following increased concentration of revenue or earnings in individual product segments, unfavorable consolidated operating trends, or material declines in risk-adjusted capitalization.

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
  • Evaluating Country Risk
  • Risk Management and the Rating Process for Insurance Companies
  • Understanding BCAR for U.S. and Canadian Life/Health 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. For more information, visit www.ambest.com.

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