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Rating Action Commentary


FITCH AFFIRMS RATINGS OF SAMMONS FINANCIAL GROUP; OUTLOOK STABLE

Fri 23 Apr, 2021 - 3:04 PM ET



Fitch Ratings - Chicago - 23 Apr 2021: Fitch Ratings has affirmed the Insurer
Financial Strength (IFS) Ratings of Midland National Life Insurance Company
(MNL) and North American Company for Life and Health Insurance (NACOLAH) at
'A+'. In addition, Fitch has affirmed Sammons Financial Group, Inc.'s (Sammons)
Long-Term Issuer Default Rating at 'A-'. The Rating Outlook is Stable for all
ratings.



KEY RATING DRIVERS

Strong Operating Performance: Sammons' has historically demonstrated strong
operating profitability and relative earnings stability, driven by strong
investment yields, good spread management, growing assets under management (AUM)
and has only experienced a limited impact as a result of the coronavirus
pandemic to date. While we believe the company has managed spread compression
well in recent years, persistently low interest rates are expected to continue
to pressure earnings in Sammons' spread-based business lines.



Investment Exposures: During 2020, Sammons took advantage of market dislocations
to reposition a portion of the portfolio into corporate credit, while reducing
exposure to certain structured and government securities. While the fixed-income
portfolio remains high quality, Fitch notes that the company's exposure to
riskier assets relative to statutory capital increased at YE20 to 113%.
Offsetting this risk is Sammons' strong historical track record in that it has
largely avoided investment losses.



Very Strong Capital: Fitch considers Sammons' capitalization to be very strong,
with the company reporting a combined RBC ratio of 370% at YE20 and scoring in
the 'Extremely Strong' category of Fitch's Prism capital model based on YE19
data, consistent with 'AAA' category guidelines. Asset leverage is considered
modestly above peers primarily due to Sammons' large securities lending program,
although the program has generated significant incremental yield for the
company. Going forward, Fitch expects that the Sammons will maintain its capital
position, and that the company will remain very strongly capitalized.



Increased Financial Leverage: Fitch continues to view Sammons' financial
leverage to be below the life insurance industry average of 25% but notes that
leverage has moved closer to peer levels as a result of the company's $850
million issuance in April of 2021. Based on YE20 data, and incorporating the new
issuance, Fitch estimates the company's financial leverage ratio would have been
17% on a pro forma basis, which compares financial leverage of 9% at YE19.
Leverage is expected to decline modestly as a result of growth in the company's
equity position.



Moderate Business Profile: Sammons' large size and top-10 position in the
individual life insurance and individual annuity markets afford the company
significant operating efficiencies and distribution advantages relative to its
smaller competitors. However, the company does compete directly in these markets
with companies that have more substantial resources. Fitch also the company's
business risk profile to be impacted by Sammons' modestly above-average exposure
to persistently low interest rates, but expects that the risks are manageable
over the ratings horizon. Fitch also notes that the company's exposure to the
fallout from the ongoing coronavirus pandemic has been limited to date, and that
Sammons has only limited exposure over the near term.



RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating
action/upgrade:

--Enhanced business profile including reduced proportional exposure to
spread-based products;

--Sustained capital strength including low operating leverage and high capital
quality;

--Reduction in allocation to structured securities and the size of the company's
securities lending program.

Factors that could, individually or collectively, lead to negative rating
action/downgrade:

--A Prism score below 'Very Strong';

--A risky asset ratio above 100%;

--Increased volatility in earnings;

--Financial leverage ratio in excess of 15%.



BEST/WORST CASE RATING SCENARIO

International scale credit ratings of Financial Institutions and Covered Bond
issuers have a best-case rating upgrade scenario (defined as the 99th percentile
of rating transitions, measured in a positive direction) of three notches over a
three-year rating horizon; and a worst-case rating downgrade scenario (defined
as the 99th percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and worst-case
scenario credit ratings for all rating categories ranges from 'AAA' to 'D'.
Best- and worst-case scenario credit ratings are based on historical
performance. For more information about the methodology used to determine
sector-specific best- and worst-case scenario credit ratings, visit
https://www.fitchratings.com/site/re/10111579



REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the
Applicable Criteria.



ESG CONSIDERATIONS

Unless otherwise disclosed in this section, the highest level of ESG credit
relevance is a score of '3'. This means ESG issues are credit-neutral or have
only a minimal credit impact on the entity, either due to their nature or the
way in which they are being managed by the entity. For more information on
Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg


RATING ACTIONS

Entity / Debt  

Rating  

Prior  


Sammons Financial Group, Inc.
LT IDR
A- 
Affirmed
A- 
 * senior unsecured

LT
BBB+ 
Affirmed
BBB+ 
Midland National Life Insurance Company
Ins Fin Str
A+ 
Affirmed
A+ 
North American Company For Life And Health Insurance
Ins Fin Str
A+ 
Affirmed
A+ 
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VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com


PARTICIPATION STATUS

The rated entity (and/or its agents) or, in the case of structured finance, one
or more of the transaction parties participated in the rating process except
that the following issuer(s), if any, did not participate in the rating process,
or provide additional information, beyond the issuer’s available public
disclosure.


APPLICABLE CRITERIA

 * Insurance Rating Criteria - Effective from 15 April 2021 to 26 November 2021
   (pub. 15 Apr 2021) (including rating assumption sensitivity)





ADDITIONAL DISCLOSURES

 * Dodd-Frank Rating Information Disclosure Form
 * Solicitation Status
 * Endorsement Policy


ENDORSEMENT STATUS

Midland National Life Insurance Company EU Endorsed, UK Endorsed North American
Company For Life And Health Insurance EU Endorsed, UK Endorsed Sammons Financial
Group, Inc. EU Endorsed, UK Endorsed


DISCLAIMER

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, THE
FOLLOWING

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COPYRIGHT

Copyright © 2021 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its
subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824,
(212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or
in part is prohibited except by permission. All rights reserved. In issuing and
maintaining its ratings and in making other report

Read More


SOLICITATION STATUS

The ratings above were solicited and assigned or maintained at the request of
the rated entity/issuer or a related third party. Any exceptions follow below.


ENDORSEMENT POLICY

Fitch’s international credit ratings produced outside the EU or the UK, as the
case may be, are endorsed for use by regulated entities within the EU or the UK,
respectively, for regulatory purposes, pursuant to the terms of the EU CRA
Regulation or the UK Credit Rating Agencies (Amendment etc.) (EU Exit)
Regulations 2019, as the case may be. Fitch’s approach to endorsement in the EU
and the UK can be found on Fitch’s Regulatory Affairs page on Fitch’s website.
The endorsement status of international credit ratings is provided within the
entity summary page for each rated entity and in the transaction detail pages
for structured finance transactions on the Fitch website. These disclosures are
updated on a daily basis.

Insurance
North America
United States


ENTITIES

 * North American Company For Life And Health Insurance
 * Midland National Life Insurance Company
 * Sammons Financial Group, Inc.





ISSUER CONTENT

 * Sammons Financial Group, Inc. (And Operating Subsidiaries)
 * Sammons Financial Group, Inc. - Ratings Navigator
 * Fitch Affirms Sammons Financial Group's Ratings; Outlook Stable
 * Sammons Financial Group, Inc. (And Operating Subsidiaries) – Update
 * Fitch Rates Sammons Financial Group, Inc.'s Senior Note Issuance 'BBB+'
 * Sammons Financial Group, Inc. (And Operating Subsidiaries)
 * Sammons Financial Group, Inc. - Ratings Navigator
 * Fitch Affirms Sammons' Ratings; Outlook Stable on Coronavirus Review
 * Fitch Affirms Ratings of Sammons Financial Group; Outlook Stable





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FITCH RATINGS ANALYSTS

Douglas Baker
Associate Director
Primary Rating Analyst
+1 312 368 3207
Fitch Ratings, Inc.
One North Wacker Drive Chicago, IL 60606

Donald Thorpe, CFA, CPA
Senior Director
Secondary Rating Analyst
+1 312 606 2353


Julie Burke, CFA, CPA
Managing Director
Committee Chairperson
+1 312 368 3158



MEDIA CONTACTS

Sandro Scenga
New York
+1 212 908 0278
sandro.scenga@thefitchgroup.com

RATINGS KEYOUTLOOKWATCHPositiveNegativeEvolvingStable 

* Long Term/Short Term Issuer Default Rating displayed in orange denotes EU or
UK Unsolicited and Non-Participatory Ratings

Where there was a review with no rating action (Review – No Action), please
refer to the “Latest Rating Action Commentary” for an explanation of key rating
drivers

*Premium content is displayed in Fitch Red



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