A.M. Best Revises Outlook to Negative for Modern Woodmen of America

A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of A+ (Superior) and issuer credit rating of "aa-" of Modern Woodmen of America (Modern Woodmen) (Rock Island, IL).

The negative outlook reflects Modern Woodmen's large proportion of interest sensitive reserves and the associated impact of spread compression on operating results in the current low interest rate environment.

The rating affirmations reflect Modern Woodmen's longstanding position as one of the largest fraternal benefit organizations in the United States, strong risk-adjusted capital position, consistently positive statutory operating earnings in recent periods and its improving balance of premiums between life and annuity products.

Offsetting these positive rating factors are Modern Woodmen's unfavorable trends in operating results, high exposure to interest sensitive reserves and relatively high exposure to structured securities in the investment portfolio.

The outlook for Modern Woodmen's ratings could be revised to stable following improvements in operating performance through the widening of earning spreads and continued growth in ordinary life premiums. The company's ratings could be downgraded if unfavorable trends in operating performance continue, leading to net losses, or there is a material decline in risk-adjusted capital due to increased risk in its investment portfolio or declines in unassigned capital.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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A.M. Best Co.
Keith Behrmann, 908-439-2200, ext. 5733
Financial Analyst
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or
Richard D. McMillan, 908-439-2200, ext. 5615
Managing Senior Financial Analyst
[e-mail]
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
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or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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