A.M. Best Downgrades Ratings of North Carolina Mutual Life Insurance Company; Ratings Remain Under Review

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has downgraded the financial strength rating to C+ (Marginal) from B- (Fair) and issuer credit rating to "b-" from "bb-" of North Carolina Mutual Life Insurance Company (NCM) (Durham, NC). The ratings remain under review with negative implications, reflecting the uncertainty surrounding the successful execution of a number of initiatives designed to increase the capital position of NCM.

The rating downgrades recognize NCM's second quarter 2009 reduction in surplus and continued operating losses. However, losses have significantly declined from the prior year. Given the volatility of the current economic environment, A.M. Best also is concerned with NCM's increase in below-investment grade bond holdings in 2009 and its commercial mortgage exposure, as each investment component represents a significant portion of its surplus.

NCM's ratings remain under review with negative implications, reflecting the uncertainty surrounding the successful execution of various initiatives being undertaken to strengthen its capital position and return to profitability. These initiatives include the additional use of reinsurance to stabilize its surplus position and further reduction in costs.

As NCM's risk-based capital position is marginal, it is imperative that these initiatives come to fruition. If NCM's strategies are unsuccessful in the near term, A.M. Best may take additional rating actions.

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

Louis Savarese, 908-439-2200, ext. 5168

louis.savarese@ambest.com

or

William Pargeans, 908-439-2200, ext. 5359

william.pargeans@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.