A.M. Best Co. has assigned a debt rating of "a" to $250 million 6.875 percent surplus notes due 2042 of The Ohio National Life Insurance Company (ONLIC).
The assigned outlook is stable.
The existing financial strength, issuer credit and debt ratings of ONLIC and its parent holding company, Ohio National Financial Services (ONFS) (both domiciled in Cincinnati, OH), are unchanged.
The surplus notes were priced on June 6, and ONLIC settled the transaction on June 11. The proceeds from the offering will be used by ONLIC to retire an intercompany surplus note due in 2021, retire its $150 million note due April, 2013 that is held at ONFS, and to fund its XXX reserves through its captive reinsurer, Montgomery Re, Inc.A.M. Best notes that the pro-forma financial leverage ratio is within the guidelines to support its current ratings. Due to the nature of this transaction, A.M. Best views this part of the issuance more as operating leverage supporting the XXX reserves.
ONLIC's ratings continue to recognize its strong absolute and risk-adjusted capital position, generally profitable statutory and GAAP operating results, diverse business profile and distribution system and ample liquidity to support its financial obligations.
Partially offsetting these positive rating factors is continued volatility in the equity markets, which impacts net amounts at risk, hedging costs and separate account fee income. In addition, ONLIC's investments in commercial mortgages and private placements are elevated relative to statutory capital and surplus.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies" and "Insurance Holding Company and Debt Ratings." Best's Credit Rating Methodology can be found at ambest.com/ratings/methodology.
A.M. Best Company is an insurance rating and information source.
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