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    Insurance Rating Methodology

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    slavinzing56

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    Insurance Rating Methodology

    Post by slavinzing56 on Tue Jul 12, 2011 9:29 am

    Fitch Ratings-Chicago-27 September 2010: Fitch Ratings has affirmed Navy Mutual Aid Association's (NMAA) Insurer Financial Strength (IFS) rating at 'A+'. The Rating Outlook is Stable.

    NMAA's IFS rating reflects the association's very strong capital levels, high quality, liquid investment portfolio, and favorable business profile with a strong niche position as a low cost provider of insurance protection products to the United States sea services and their families.

    Fitch views as additional strengths NMAA's conservative reserving, excellent persistency, and consistently low expense ratios. Fitch believes that NMAA's 'war risk' is prudently managed and that mortality experience is within expectations despite the current conflicts in the Middle East.

    NMAA exhibits a conservative financial profile with predictable cash flows. Product liabilities are composed of predominately term and whole life insurance products with no variable annuity products or guarantees. NMAA investment portfolio is composed of over 30% U.S. government or government sponsored enterprise debt, high quality corporate bonds and has no exposure to problematic, structured securities. Financial flexibility is considered adequate in respect to NMAA's unique business profile, and product portfolio.

    The Stable Outlook is driven by NMAA's solid results under Fitch's stress scenarios and expectations for consistent operating earnings in 2010 driven by low cost operations and strong levels of investment income.

    Rating concerns include NMAA's limited access to capital markets, moderate volatility in capital driven by common stock investments and the long term challenge of membership growth.

    While moderate in scale and considered a niche type writer, NMAA has solid credit fundamentals and has outperformed many peer rated companies in the challenging 2008-2009 period. Fitch notes NMAA's risky asset ratio and realized credit related losses compare very favorably with the life insurance industry at year-end 2009.

    Fitch expects NMAA will maintain a solid balance sheet in 2010 with strong capital levels and a high-quality, liquid investment portfolio. Fitch expects NMAA to report good operating performance in 2010, driven by low expenses, strong levels of investment income and moderate credit-related investment losses.

    NMAA serves active, reserve and retired members of the U.S. Navy, U.S. Marine Corps, U.S. Coast Guard, U.S. Public Health Service (USPHS), National Oceanic and Atmospheric Administration (NOAA) and had total assets of approximately $2.4 billion at year-end 2009. The association is located in Arlington, VA and currently has approximately 100,000 members and more than $20.7 billion of insurance in force.

    Within Fitch's rating rationale are key rating drivers. If NMAA were to materially deviate from any of these items, especially for an extended period, the ratings could be affected. Included within these key rating drivers are the following:

    --Net operating earnings of $10 million-$15 million a year;
    --Gross investment losses of less than $20 million in 2010;
    --Estimated risk based capital above 300% company action level;
    --Significant change in war risk exposure and experience;
    --Unfavorable change in tax/regulatory status.

    Fitch affirms the following rating with a Stable Outlook:

    Navy Mutual Aid Association
    --IFS at 'A+'.

    Contact:

    Primary Analyst
    R. Andrew Davidson, CFA,
    Senior Director
    +1-312-368-3144
    Fitch, Inc.
    70 W. Madison Street
    Chicago, IL 60602

    Secondary Analyst
    Julie A. Burke CPA, CFA
    Managing Director
    +1-312-368-3191

    Committee Chairperson
    Keith Buckley
    Group Managing Director
    +1-312-368-3211

    Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com.

    Additional information is available at 'www.fitchratings.com'.

    Applicable Criteria and Related Research:

    --'Insurance Rating Methodology', dated Aug. 13, 2010;
    --'Life Insurance Rating Methodology', dated March 24, 2010.

    Applicable Criteria and Related Research:
    Insurance Rating Methodology
    http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547766
    Life Insurance Rating Methodology
    http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=506285

    ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE
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