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A.M. Best Affirms Credit Ratings of Ohio National Financial Services, Inc. and Its Subsidiaries
[August 02, 2017]

A.M. Best Affirms Credit Ratings of Ohio National Financial Services, Inc. and Its Subsidiaries


A.M. Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "aa-" of The Ohio National Life Insurance Company and its wholly owned subsidiary, Ohio National Life Assurance Corporation (together referred to as the Ohio National Life Group). These companies are the principal insurance subsidiaries of Ohio National Financial Services, Inc. (ONFS), which is an intermediate holding company wholly owned by Ohio National Mutual Holdings, Inc. Concurrently, A.M. Best has affirmed the Long-Term ICR of "a-" and all existing Long-Term Issue Credit Ratings (Long-Term IR) of ONFS. (See below for a detailed listing of the Long-Term IRs).

Additionally, A.M. Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of "a+" of National Security Life and Annuity Company (NSLAC) (New York, NY). The outlook of these Credit Ratings (ratings) is stable. All companies are headquartered in Cincinnati, OH, unless otherwise specified.

The rating affirmations reflect the Ohio National Life Group's overall middle-market position within the individual life and variable annuity markets, its continued positive trend in individual life sales and its stable adjusted GAAP operating results, along with strong risk-adjusted capitalization ratios. The ratings also recognize the group's recent expansion into the retirement services market and its strong front-end risk management practices.

Partially offsetting these positive rating factors is the group's above-average separate account exposure, which contributes to potential equity market and interest rate sensitivity, although these risks are mitigated partially by hedging and the utilization of external reinsurance. While the group's risk-adjusted capitalization remains strong, it has been enhanced by the use of captives to support redundant reserves and the issuance of surplus notes. Additionally, A.M. Best note the group's expansion into the highly competitive retirement services market, which typically requires significant scale advantages to compete effectively. Financial leverage, when measured on a tangible capital basis, is elevated, although it is within the higher range of A.M. Best's expectations when computed on a total capital basis. A.M. Best also notes that interest coverage on a management operating earnings basis has historically been somewhat low relative to the expectation for this rating level.

The ratings of NSLAC reflect its strategic importance as the New York marketing arm for variable annuity products and its strong risk-adjusted capitalization. These strengths are offset partially by a modest business and earnings profile relative to the group, as well as unfavorable operating trends in variable annuities.

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


Ohio National Financial Services, Inc.-
-- "a-" on $250 million 6.625% senior unsecured notes, due May 2031
-- "a-" on $300 million 6.375% senior unsecured notes, due April 2020

The Ohio National Life Insurance Company-
-- "a" on $50 million 8.50% surplus notes, due May 2026
-- "a" on $250 million 6.875% surplus notes, due June 2042

This press release relates to Credit Ratings 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 see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.


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