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A.M. Best Upgrades Issuer Credit Rating of Farmers New World Life and Affirms Ratings of Zurich American Life Insurance Company

September 4, 2014



OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Besthas upgraded the issuer credit rating (ICR) to ďa+Ē from ďaĒ and affirmed the financial strength rating (FSR) of A (Excellent) of Farmers New World Life Insurance Company (FNWL) (Mercer Island, WA). Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and the ICR of ďaĒ of Zurich American Life Insurance Company (ZALICO) (Schaumburg, IL). These companies form the core U.S. life entities within the Zurich Insurance Group Global Life North America (ZIG GLNA) region. The outlook for all ratings is stable.

The upgrade of FNWLís ICR reflects its strategic role in marketing life and annuity products to the middle market as part of the Farmers Exchanges agent distribution network, strong risk-adjusted capitalization and high quality investment portfolio. FNWL is a core subsidiary within ZIG GLNA as it continues to generate the vast majority of earnings and premiums. Partially mitigating factors include narrow spreads from large in-force blocks of business that have high minimum guarantee rates, ongoing challenges in enhancing life productivity within the Farmers agent base while improving persistency and an elevated percentage in holdings of structured securities, although these securities have historically performed well.

The ratings affirmation of ZALICO reflects its refined business profile toward the high net worth, private placement and global employee benefits marketplace, along with favorable top-line premium growth and new business margins. Additionally, the ratings reflect the high credit quality and liquidity profile of ZALICOís investment portfolio along with adequate levels of risk- adjusted capitalization. Historically, capital has been managed through high utilization of reinsurance provided by ZIG for new and legacy business lines to promote capital efficiency and to mitigate statutory losses related to variable annuities and bank-owned life insurance. Partially mitigating factors for ZALICO include a somewhat narrow business profile in the highly competitive U.S. market and the need to continue to execute on its overall business strategy. Other factors include moderate but increasing premium growth and statutory losses associated with new business strain.

Positive rating actions for ZALICO and FNWL are not likely in the near term. However, factors that may lead to negative rating actions in the future include a material decline in risk-adjusted capitalization, a decline in operating performance below A.M. Bestís expectations, or a lack of reinsurance or capital support from ZIG.

Concurrently, A.M. Best has downgraded the FSR to A- (Excellent) from A (Excellent) and the ICR to ďa-Ē from ďaĒ of Universal Underwriters Life Insurance Company (UULIC) (Overland Park, KS). The outlook for these ratings is stable. While UULIC possesses strong risk-adjusted capitalization, an investment portfolio of good credit quality and continued operating profitability, there is a lack of top line revenue growth and its business and operating profile remains modest relative to the enterprise. Upward rating movement for UULIC is not likely in the near future and negative rating pressure may occur if there is a significant decrease in risk-adjusted capitalization.

The methodology used in determining these ratings is Bestís Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bestís rating process and contains the different rating criteria employed in the rating process. Bestís Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

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

Copyright © 2014 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.



A.M. Best Company

Frank Walko, 908-439-2200, ext. 5072

Financial Analyst

frank.walko@ambest.com

or

Rosemarie Mirabella, 908-439-2200, ext. 5892

Assistant Vice President

rosemarie.mirabella@ambest.com

or

Christopher Sharkey, 908-439-2200, ext. 5159

Manager, Public Relations

christopher.sharkey@ambest.com

or

Jim Peavy, 908-439-2200, ext. 5644

Assistant Vice President, Public Relations

james.peavy@ambest.com

Source: A.M. Best Company


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