NWLIA National Western Life Insurance Company (MM)

A.M. Best Co. has affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit rating (ICR) of �a-� of National Western Life Insurance Company (NWL) (Denver, CO) [NASDAQ: NWLIA]. The outlook for both ratings has been revised to positive from stable. The rating actions reflect NWL�s diverse business profile marketing both to the U.S. and international markets, its solid operating results, superior risk-adjusted capitalization and increasing statutory capital and surplus and GAAP equity trends. Offsetting these strengths are the challenges to manage its increasing exposure to interest-sensitive annuity and universal life liabilities and continuing to grow its domestic ordinary life businesses. In revising the outlook, A.M. Best acknowledges NWL�s competitive position in its international markets that continues to provide diversification of revenue, insurance risk and profitable operating results. In addition, the revised outlook reflects management�s concentrated efforts to grow its U.S. domestic ordinary life segment that A.M. Best believes will further diversify NWL�s business profile, as well as its initiatives to further enhance and refine its asset/liability and enterprise risk management processes. NWL�s net premium growth in recent years has been primarily driven by its equity-indexed annuity (EIA) segment. While NWL�s annuity growth has resulted in significant interest rate risks, the company�s strong risk-adjusted capitalization, surrender charge protection and market value adjustment features partially mitigate these risks. In noting NWL�s growth in EIAs, A.M. Best acknowledges its prudent product design and customer profiles, effective hedging programs and active market conduct and compliance programs. However, A.M. Best remains cautious over the potential declines in the industry�s future EIA sales and its impact on earnings given the increasing due diligence demanded to comply with the prevailing heightened regulatory environment. For Best�s Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings. Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.