|[September 17, 2013]
Fitch Affirms Minnesota Life's IFS Rating at 'AA-'; Revises Outlook to Positive
CHICAGO --(Business Wire)--
Fitch Ratings has affirmed at 'AA-' the Insurer Financial Strength (IFS)
ratings of Minnesota Life Insurance Company (Minnesota Life) and its
subsidiary, Securian Life Insurance Company. Fitch has also affirmed the
rating on Minnesota Life's surplus notes at 'A'. The Rating Outlook has
been revised to Positive.
KEY RATING DRIVERS
Today's rating actions reflect Fitch's view that Minnesota Life's
operating results continue to improve, while its balance sheet
fundamentals remain extremely strong.
Minnesota Life's operating earnings have steadily improved following the
financial crisis. Through the first half of 2013, earnings benefited
from better than expected interest margins and expense management, which
more than offset unfavorable mortality experience primarily in the group
line. The mortality experience remains within expectations. The
company's operating return on assets was .90% in the first half of 2013
compared to .93% for the full year 2012. Realized investment losses
Minnesota Life's ability to service debt is extremely strong, with GAAP
based coverage of 29x and statutory interest coverage in excess of 20x.
Minnesota Life's balance sheet fundamentals include the company's
extremely strong risk-adjusted capitalization, very low operating
leverage, and low financial leverage. Fitch estimates that the company's
risk-based capital (RBC) ratio was 499% as of June 30, 2013 compared
with 507% at year-end 2012. Operating leverage is among the lowest in
the Fitch universe at less than 5x. Financial leverage is very low at 4%
and is comprised primarily of long duration surplus notes. The company's
strong capitalization and good quality of capital are key factors
supporting the rating.
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
structure. Asset quality remains strong. The company's risky assets
ratio is below average at 64%.
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. Fitch also takes
a favorable view of Minnesota Life's high quality career agency
distribution channel and strong technology-ased service platform, which
Fitch considers to be beneficial to its group life and retirement
services product lines.
Minnesota Life, the primary operating subsidiary of Securian Financial
Group, is headquartered in St. Paul, Minnesota and reported total
admitted assets of approximately $30.3 billion and capital and surplus
of $2.3 billion at June 30, 2013.
The key rating triggers that could result in an upgrade include:
--Maintain risk-adjusted capitalization and quality of capital at
--No significant deterioration in statutory or GAAP-based operating
results, with GAAP-based return on assets maintained at or above .90%
over the next 18 months;
--Continued low financial leverage;
--Continued low asset risk;
--Modest M&A activity.
The key rating triggers that could result in the Outlook being revised
to Stable include:
--Deterioration in statutory or GAAP-based operating results.
The key rating triggers that could result in a downgrade include:
--Significant deterioration in financial performance, resulting in a
GAAP-based ROA below .60% on a sustained basis;
--A sustained decline in the company's RBC ratio to a level below 450%;
--An increase in financial leverage above 15% as measured by
Fitch affirms the following ratings with a Positive Outlook:
Minnesota Life Insurance Company
--IFS at 'AA-';
--Issuer Default Rating at 'A+';
--$118 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'
Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (Aug. 19, 2013).
Applicable Criteria and Related Research:
Insurance Rating Methodology
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