OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has downgraded the financial strength rating (FSR) to A+ (Superior) from A++ (Superior) and issuer credit ratings (ICR) to "aa" from "aa+" of Western & Southern Financial Group, Inc.'s (WSFG) core life insurance subsidiaries. The subsidiaries include The Western and Southern Life Insurance Company (WSLIC), Western-Southern Life Assurance Company, Columbus Life Insurance Company, Integrity Life Insurance Company, National Integrity Life Insurance Company (New York) and The Lafayette Life Insurance Company (Lafayette Life) (Indiana).

Concurrently, A.M. Best has downgraded the ICR to "a" from "aa-" and the debt rating to "a" from "aa-"on $500 million 5.75% senior unsecured notes due 2033 of WSFG. The downgrading of the debt ratings reflects a revision to standard notching for the group in accordance with A.M. Best's published debt rating methodology. The outlook for all ratings is stable. All companies are domiciled in Cincinnati, OH, except where specified. All ratings recognize the unconditional guarantee from WSLIC on the subsidiaries.

The rating actions reflect WSFG's recent decline in capitalization"”both on a statutory and GAAP basis"”from realized and unrealized investment losses, somewhat modest earnings and premium growth trends relative to its rating level and continued exposure to further investment losses.

A.M. Best notes that WSFG recorded a 17% decline in its year-end 2008 adjusted statutory capitalization, with a larger reduction on a GAAP basis. This decline was primarily due to unrealized losses in its large equity portfolio as well as impairments on certain fixed income instruments. WSFG has historically maintained a higher than average allocation to common equity securities supporting its corporate account, including several large holdings in financial stocks, which reported significant declines in market value. Some exposure remains in residential and commercial mortgage-backed securities. In recent years, the lower return retirement savings lines have been the major and increasing contributors to growth in revenue and earnings, and competitive pressures may present challenges to grow earnings at levels commensurate with the group's similarly rated peers.


Despite recent investment losses, A.M. Best believes that WSFG maintains a strong level of risk-adjusted capitalization, an overall conservative operating profile and a diverse product portfolio and distribution. The ratings and stable outlook also recognize the strong regional presence WSFG has built, particularly in the upper Midwest. The group's earnings provide strong debt service capacity to support fixed charges, particularly given its low financial leverage. With strong operating fundamentals through consolidating businesses and expense management programs, WSFG has generated earnings from both its protection and wealth accumulation segments in recent years, contributing to its strong capital base.

For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

A.M. Best Co.

Analysts

Raj Shah, 908-439-2200, ext. 5409

raj.shah@ambest.com

or

Stephen Irwin, 908-439-2200, ext. 5454

stephen.irwin@ambest.com

or

Public Relations

Jim Peavy, 908-439-2200, ext. 5644

james.peavy@ambest.com

or

Rachelle Morrow, 908-439-2200, ext. 5378

rachelle.morrow@ambest.com

Source: A.M. Best Co.