KBRA Assigns Ratings to National Western Life and Ozark National and Affirms Other Subsidiaries of Prosperity Group Holdings L.P.
16 Jul 2024 | New York
KBRA assigns insurance financial strength ratings (IFSR) of A- to National Western Life Insurance Company (NWLIC) and Ozark National Life Insurance Company (ONL), newly acquired subsidiaries of Prosperity Group Holdings, L.P. (PGH). At the same time, KBRA affirms the IFSRs of A- for each of the following insurance operating entities of PGH: Prosperity Life Assurance Ltd., Shenandoah Life Insurance Company, SBLI USA Life Insurance Company, Inc. and S.USA Life Insurance Company, Inc. The Outlook for all ratings is Stable.
Prosperity’s acquisition of National Western Life Group, Inc. (NWLGI) closed on July 9, 2024. NWLIC and ONL were subsidiaries of NWLGI. NWLIC is now a subsidiary of S.USA Life Insurance Company, Inc. and ONL is a subsidiary of NWLIC.
The ratings reflect solid capitalization, an experienced and credentialed executive management team, and the continued support of a committed investor. Additionally, the company has developed a credible position in middle-market M&A/reinsurance and has an established presence in the bank/broker dealer channel for fixed annuities. National Western’s independent distribution channels are complementary to Prosperity’s distribution channels. Prosperity continues to further develop its retail franchise and enhance its operating platforms. Prosperity benefits from relatively stable liabilities, including a mature closed block and an annuity portfolio that is predominantly fixed, indexed, and immediate, with no living benefit riders or secondary guarantees. The National Western book of business is stable and profitable.
Balancing these strengths are factors including execution risk related to continued organizational build out, ongoing systems and risk management investments, rapid growth, and the integration of newly acquired NWLGI. KBRA views the company’s enterprise risk management (ERM) as appropriate for its current stage of development and, while acknowledging material enhancements to-date, believes that ERM needs to continue to mature to keep pace with the company’s ongoing transformation and growth. New business strain, growth-related expenses, and lack of scale have been constraints on profitability but are nearing inflection points. The acquisition of NWL brings Prosperity to scale ahead of its targeted timeframe. Completing platform enhancement initiatives during 2024 is a priority and management expects capital needs for planned organic growth will become self-funding in the near term. Prosperity’s targeted organic and inorganic markets are competitive. Typically, Prosperity’s holding company is primarily reliant on third parties such as Elliott and its credit facility providers for near-term cash and capital resources.
Factors that could positively impact the rating include development of earnings and profitability materially ahead of plan while maintaining strong capitalization, sustained balance in business mix profile, evidenced in product reserves and earnings as well as in geographic mix of premiums, solidified market position in M&A/Reinsurance, enhanced market position in its targeted organic markets, development of material financial resources available to the holding company beyond additional borrowings or Elliott capital contributions, and development of material, sustained increases in risk-based capital. Factors that could negatively impact the rating include strategic plan execution that materially lags expected milestones, lack of continued ERM maturation consistent with Prosperity’s growth and transformation, inability to outrun new business strain, resulting in profitability materially behind plan, material inability to secure additional capital contributions from Elliott, lack of development of financial resources available to the holding company beyond additional borrowings or Elliott capital contributions, and lack of pricing discipline in M&A/reinsurance.
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