AM Best improves credit ratings of Nassau Financial Group, LP’s insurance subsidiaries
OLDWICK, New Jersey – (COMMERCIAL THREAD) –AM Best raised the financial strength rating (FSR) to B ++ (Good) from B + (Good) and the credit ratings of long-term issuers (long-term ICR) to “bbb” (Good) from “bbb-” (Good) ) of Nassau Life Insurance Company, Nassau Life and Annuity Company and Nassau Life Insurance Company of Kansas (Overland Park, KS). All of the aforementioned companies are collectively referred to as the Nassau Insurance Group (Nassau).
In addition, AM Best improved the long-term ICR to “bb” (Fair) of “b +” (Marginal) of Nassau Companies of New York, Inc., as well as its existing long-term issue credit ratings. (Long-Term Credit Ratings) RI). All companies are headquartered in Hartford, CT, unless otherwise specified. The outlook for these credit ratings (ratings) has been revised from negative to stable. (See below for a detailed list of long-term IRs.)
Ratings reflect the strength of Nassau’s balance sheet, which AM Best considers strong, as well as its marginal operational performance, neutral business profile and appropriate enterprise risk management (ERM).
The rating upgrades reflect the improvement in the group’s risk profile and the strengthening of risk-adjusted capitalization levels on a GAAP consolidated basis, as measured by Best’s capital adequacy ratio (BCAR), due to the transfer from PHL Variable Insurance Company to a holding company which is not owned or controlled by Nassau Financial Group, LP or any of its subsidiaries. The PHL Variable Insurance Company held a significant number of high interest rate universal life insurance policies with secondary guarantees, which was one of the main reasons for the significant volatility of the organization’s earnings in the past. in recent years. The group’s risk-adjusted capital levels were also bolstered by a significant injection of equity from an outside investor. In addition, Nassau’s capital and surplus position increased significantly in the third quarter of 2021 due to the retention of improving operating results which benefited from reduced mortality, a rebound in investment income and the increase in earnings of Foresters Life Insurance and Annuity Company (FLIAC) acquisition completed in 2020. As a result, the company’s leverage ratio improved significantly and the amount of intangible assets was reduced to approximately 75% of equity.
While Nassau recorded positive earnings in 2021, net income has historically seen significant fluctuations under GAAP and statutory accounting due to the reinsurance business, declining investment income, and increasing profitability. mortality within its legacy life insurance business as well as other non-recurring expenses. AM Best notes that declining profits in recent periods and the use of excess capital for the acquisition of FLIAC have significantly reduced the company’s statutory capital position and limited its financial flexibility. The company also maintains exposure to structured securities within its investment portfolio (around 20%), including secured loan bonds, which includes high exposure to lower rated tranches. AM Best believes that this part of the investment portfolio would be less liquid in the event of a crisis. However, the group only experienced a moderate amount of depreciation in its general account investment portfolio in 2020 and until the third quarter of 2021 and currently maintains a significant position of unrealized capital gain.
Management has made significant progress in recent years, streamlining operations and strengthening its ERM framework and capabilities. This includes Nassau’s focus on environmental, social and governance (ESG) initiatives, which includes a diversity, equity and inclusion agenda and support for environmentally focused organizations.
The following long-term RIs have been upped with a revised outlook from negative to stable:
New York Nassau Companies–
– to “bb” (Fair) of “b +” (Marginal) on $ 300 million of 7.45% senior unsecured notes, maturing in 2032
Nassau Life Insurance Company–
– to “bb +” (Fair) of “bb-” (Fair) on excess notes of 175 million dollars at 7.15%, maturing in 2034
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