AM Best Affirms Credit Ratings of Western & Southern Financial Group, Inc. and Its Subsidiaries

AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of “aa” (Superior) of the life insurance subsidiaries of Western & Southern Financial Group, Inc. (WSFG). The WSFG subsidiaries included in this rating unit are The Western and Southern Life Insurance Company (WSLIC), Western-Southern Life Assurance Company, Columbus Life Insurance Company, Integrity Life Insurance Company, National Integrity Life Insurance Company (Greenwich, NY) and The Lafayette Life Insurance Company (Lafayette Life) (collectively referred to as W&SF Group). WSFG is an intermediate stock holding company of the ultimate parent company, Western & Southern Mutual Holding Company. All companies are domiciled in Cincinnati, OH, unless otherwise specified.

Concurrently, AM Best has affirmed the FSR of A+ (Superior) and the Long-Term ICR of “aa” (Superior) of Gerber Life Insurance Company (Gerber Life) (White Plains, NY). In addition, AM Best has affirmed the Long-Term ICR of “a” (Excellent) and the Long-Term Issue Credit Ratings (Long-Term IRs) on the senior unsecured notes of WSFG, as well as the Long-Term IRs of “a+” (Excellent) of WSLIC’s unaffiliated surplus notes. (See below for a detailed list of the Long-Term IRs.) The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect W&SF Group’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, favorable business profile and very strong enterprise risk management (ERM).

The ratings of Gerber Life reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and very strong ERM. The ratings also reflect implicit support from the greater organization.

The higher interest rate environment along with steady growth in total invested assets—partly driven by strong individual annuity sales over the last three years—have supported favorable net investment income generation for W&SF Group and a steady increase in consolidated GAAP operating earnings. At year-end 2024, the group's consolidated GAAP assets totaled approximately $80.9 billion with an additional $41.2 billion in external assets under management or administration. Strong sales in the group’s core life insurance segment have demonstrated the effectiveness of a well-diversified product portfolio and a strong distribution network. New business acquisition costs such as commissions and required capital charges have contributed to a trend of more modest but favorable statutory earnings, which are expected to drive further strengthening of risk-adjusted capitalization levels over time should reserve releases remain adequate.

Unlike several other carriers growing in the highly competitive U.S. individual annuity market, W&SF Group has low reinsurance leverage across its entities, and in particular does not currently use any captive, offshore or sidecar reinsurers that are not well-rated nor domiciled in regimes that utilize either market condition and best-estimate reserving assumptions or permitted practices, which enhances AM Best’s view of the group’s quality of capital.

Gerber Life and Fabric Technologies Inc, both owned by WSLIC since 2018 and 2022, respectively, have continued to focus on closing mortality protection gaps for the middle market, primarily through individual life insurance products sold digitally in the direct-to-consumer and independent agent channels, which also diversifies the greater organization’s annuity, investment and mortality risks.

Partially offsetting these positive rating factors is the potential for further individual annuity disintermediation in a competitive crediting rate environment, which could bring some earnings volatility, particularly because general account reserves have continued to shift toward interest-sensitive business, such as individual deferred annuities. As a leading mutual holding company in the U.S. life insurance and annuity markets, the group already has access to debt capital markets, which increases WSFG’s financial flexibility on an aggregate basis. WSFG has additional liquidity should it be needed through a bank line of credit that in recent years has been strategically drawn and repaid to offset the impact of new business strain on available and risk-adjusted capital. Several operating subsidiaries are also members of the Federal Home Loan Bank, and some insurers have advances in funding agreements. AM Best will continue to monitor W&SF Group’s continuous liquidity planning process under its ERM program, and its other possible sources for additional liquidity, which include dividends from the operating subsidiaries and marketable fixed income and equity investments that could be sold, if needed. Overall, financial and operating leverage, and interest coverage ratios are within AM Best's tolerance for the rating levels, and the group has some additional debt capacity, if needed.

W&SF Group also carries relatively modest goodwill as a statutory admitted asset from its acquisition of Gerber Life. Other areas AM Best will continue to monitor include some investment concentration in direct real estate and mortgage loans and the group’s strategy for its participating whole life insurance business sold through WSLIC career agents and Lafayette Life via independent agents and the level of policyowner dividends, as well as other non-guaranteed policy elements in a rising rate environment, the group’s longevity risk exposure associated with payout annuities and the potential for higher anti-selection or selective withdrawals by policyowners that lead to higher mortality claims for Gerber Life than was priced.

The following Long-Term IRs have been affirmed with stable outlooks:

Western & Southern Financial Group, Inc.—

-- “a” (Excellent) on $500 million 5.75% senior unsecured notes, due 2033

The Western and Southern Life Insurance Company—

-- “a+” (Excellent) on $500 million 3.75% surplus notes, due 2061

-- “a+” (Excellent) on $500 million 5.15% surplus notes, due 2049

This press release relates to Credit Ratings that have been published on AM 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 see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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