AM Best Affirms Credit Ratings of Nassau Financial Group, L.P.’s Insurance Subsidiaries

AM Best has affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Ratings (Long-Term ICR’s) of “bbb” (Good) of Nassau Life Insurance Company, Nassau Life and Annuity Company and Nassau Life Insurance Company of Kansas (Overland Park, KS). These companies are collectively referred to as the Nassau Insurance Group (Nassau). In addition, AM Best has affirmed the Long-Term ICR of “bb” (Fair) of Nassau Companies of New York, Inc., along with its Long-Term Issue Credit Ratings (Long-Term IRs). All companies are headquartered in Hartford, CT, unless otherwise specified. The outlook of these Credit Ratings (ratings) is stable (See below for a detailed listing of the Long-Term IRs.)

The ratings reflect Nassau’s balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The ratings reflect the group’s strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which has benefited from a recent improvement in earnings on a statutory basis. Nassau’s capital and surplus position has increased significantly through the third quarter of 2022 due to the improving operating results, driven predominantly by reduced mortality, additional earnings from a recent acquisition, favorable premium growth, a rebound in investment income and a large capital infusion from the holding company. The group also maintains good liquidity with strong operating cash flows and access to the Federal Home Loan Bank and additional credit facilities at its parent. Financial leverage had been somewhat elevated at Nassau but declined in the past year to a moderate level.

While Nassau experienced positive earnings in recent years, net income historically had experienced significant fluctuations on a GAAP and statutory accounting basis due to reinsurance activity, fluctuating investment income, some increased mortality within its legacy life insurance business and other nonrecurring expenses. In addition, the quality of capital at Nassau is somewhat diminished by the use of an affiliated offshore reinsurance entity and has fluctuated at times due to the group’s acquisition strategy. GAAP equity also has been very volatile on a consolidated basis at Nassau Financial Group L.P., the ultimate parent, due to unrealized losses in its investment portfolio and the impact of derivatives from rising interest rates, consistent with similar impacts observed across the industry.

Nassau maintains exposure to structured securities within its investment portfolio (approximately 24%), including collateralized loan obligations that carry some elevated exposure to lower-rated tranches. AM Best believes that this lower-rated portion of the structured securities holdings would be less liquid during stress events. However, the group experienced just a moderate amount of impairments in its general account investment portfolio through third-quarter 2022. AM Best will continue to monitor management actions on overall strategic operations, including the ERM framework and capabilities.

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

Nassau Companies of New York, Inc.—

-- “bb” (Fair) on $300 million 7.45% senior unsecured notes, due 2032

Nassau Life Insurance Company—

-- “bb+” (Fair) on $175 million 7.15% surplus notes, due 2034

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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