|[January 24, 2013]
Fitch Affirms Minnesota Life's IFS Rating at 'AA-'; Outlook Stable
CHICAGO --(Business Wire)--
Fitch Ratings has affirmed the Insurer Financial Strength (IFS) ratings
of Minnesota Life Insurance Company (Minnesota Life) and its subsidiary,
Securian Life Insurance Company at 'AA-'. Fitch has also affirmed the
rating on Minnesota Life's surplus notes at 'A'. The Rating Outlook is
The rating affirmation reflects Minnesota Life's strong balance sheet
fundamentals and conservative risk profile. The ratings also consider
the company's moderately weak earnings relative to similarly rated
peers, as well as macroeconomic challenges and a strong competitive
environment in its core markets, within which the company often faces
insurers with greater scale and resources.
Minnesota Life's strong balance sheet fundamentals reflect the company's
solid capitalization, low operating leverage, and low financial
leverage. The company's risk-adjusted capitalization, which is a key
factor supporting the company's ratings, remained strong and stable in
2012. The company reported a risk-based capital (RBC) ratio of 518% of
the company action level at Dec. 31, 2011, and Fitch expects the company
to report and RBC ratio in excess of 500% for Dec. 31, 2012.
In addition to the company's strong risk-adjusted capitalization,
Minnesota Life's solid balance sheet fundamentals are supported by its
low statutory operating leverage of 4.6x as measured by adjusted
liabilities to total adjusted capital, as well as low financial leverage
of approximately 5% on a GAAP basis.
Fitch notes that Minnesota Life's liquidity profile continues to be very
favorable. The company's results benefit from its large,
investment-grade, publicly traded bond portfolio and stable liability
Minnesota Life's conservative risk profile reflects balanced,
diversified sources of revenue that serve to moderate earnings
volatility, although growth in fee income related to capital market
performance could add further volatility in the future. While the
company's product lines have produced below average combined
profitability relative to similarly rated peers, Fitch acknowledges that
the company's products are reflective of management's mutual insurance
company philosophy. Fitch also takes a favorable view of Minnesota
Life's high quality career agency distribution channel and strong
technology-based service platform, which Fitch considers to be
beneficial to its group life and retirement services product lines.
Fitch expects Minnesota Life's near-term operating profitability to
moderate somewhat, as recently favorable mortality experience reverts to
historical averages. Over the course of 013, Fitch anticipates the
company's profitability as measured by GAAP-based return on equity to be
between 6% and 7%, which is within current rating expectations. In
addition, Fitch believes that intense market competition will continue
to challenge the company in its efforts to generate profitable top line
growth over the next year, and low interest rates will likely pressure
Minnesota Life, the primary operating subsidiary of Securian Financial
Group, is headquartered in St. Paul, Minnesota and reported total
admitted assets of approximately $28.1 billion and capital and surplus
of $2.1 billion at Sept. 30, 2012.
The key rating triggers that could result in an upgrade include:
--Sustained strengthening of capitalization, including a company action
level risk-based capital (RBC) ratio above 600% with strong capital
--Sustained strengthening of financial results, including a GAAP
operating return on equity of 10% or higher.
The key rating triggers that could result in a downgrade include:
--Significant deterioration in financial results that include sustained
GAAP operating return on equity below 4%;
--A sustained decline in the company's RBC ratio to a level below 450%
and an increase in financial leverage above 15% as measured by
Fitch affirms the following ratings with a Stable Outlook:
Minnesota Life Insurance Company
--IFS at 'AA-';
--Issuer Default Rating at 'A+';
--$120 million Rule 144a surplus notes 8.25% due 2025 at 'A'.
Securian Life Insurance Company
--IFS at 'AA-'.
Additional information is available at 'www.fitchratings.com'.
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' (Jan. 11, 2013);
--'Life Insurance (U.S.) Sector Credit Factors' (Oct. 9, 2012);
--'Minnesota Life Insurance Company (A Subsidiary of Securian Financial
Group, Inc.)' (July 9, 2012).
Applicable Criteria and Related Research:
Life Insurance (U.S.) Sector Credit Factors
Minnesota Life Insurance Company (A Subsidiary of Securian Financial
Insurance Rating Methodology - Amended
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