A.M. Best Improves Outlook, Affirms Excellent Rating

(May 9, 2005) A.M. Best has announced an affirmation of the A (Excellent) financial strength rating for National Life Group.

Reflecting the strengthening of the company’s overall performance and financial metrics, Best has also lifted the Group’s outlook to “stable.”

The affirmation of the company’s financial strength rating and improvement in the outlook assigned to the Group applies to its key insurance subsidiaries, National Life Insurance Company and Life Insurance Company of the Southwest. The action follows a similar rating affirmation and outlook improvement issued recently by Standard and Poor’s. Company officials said the ratings and improved outlook assignments stand as further affirmation from independent analysts that the company is making the right decisions, showing the right results and moving in the right direction.

A.M. Best, the world’s oldest insurance rating and information source, said its revised outlook for National Life Group “reflects significantly improved financial metrics, which include positively trending sales and operating earnings, strong growth in absolute and risk-adjusted capitalization and solid growth in assets under management.”

The rating also reflects the group’s strong sales growth, particularly equity indexed annuities, Best said in a press release issued this week, and recognizes National Life’s improved operating fundamentals, including maintenance of strong investment spreads despite low interest rate levels, higher asset management fees and favorable persistency and mortality trends as well as lower operating expenses.

“National Life continues to diversify its distribution and product platform, which is complemented by the excellent performance of its mutual fund family, The Sentinel Funds, and strong marketing niche in the 403(b) market through LSW,” Best analysts said. “In addition, A.M. Best notes that National Life has reduced its exposure to below investment grade bonds, strengthened its risk management practices and improved the level of its financial discipline.”

The analysis of the 155-year-old financial services company also noted that there are increased levels of competition in the equity indexed annuity marketplace. “In addition, the company will need to continue to manage expense levels to maximize profitability,” Best said. “While National Life’s total debt-to-capital has increased over the last several years, its current level of approximately 20% is prudent for the current rating category. Additionally, interest coverage is strong and the company is well-positioned to meet its liquidity needs.”

National Life Group is a dynamic and growing family of financial service companies, unified in values and purpose but differentiated by specialty, structure and size. Affiliates and divisions within National Life Group operate in locations throughout the United States and offer products and services, that help a broad spectrum of individuals and businesses meet their financial goals.