What is the impact of the merger between National Western and Prosperity Life?
National Western Life Group, Inc. (National Western) and Prosperity Life Group (Prosperity life) have announced a groundbreaking $1.9 billion cash merger agreement.
The merger between these life insurance companies marks a significant milestone in the expansion of their insurance business.
The merger is funded through internal sources, a capital commitment from affiliates of Elliott Investment Management L.P., and additional borrowing. It strengthens Prosperity Life Group’s insurance business.
Under the agreement, S. USA Life Insurance Company, an affiliate of Prosperity Life Group, acquires National Western, offering a remarkable 87.1% premium to the unaffected Class A Common Stock share price.
The unanimous approval from National Western’s Board of Directors underscores the strategic importance of this merger.
Both companies express their enthusiasm for the transformative impact on their operations. The merger is expected to close in the first half of 2024, subject to customary closing conditions and regulatory approvals.
How does the merger agreement impact the life insurance companies’ credit ratings?
The merger has not only captured the attention of the industry, but also triggered a review of National Western’s credit ratings by AM Best.
The Financial Strength Rating (FSR) of A (Excellent) and Long-Term Issuer Credit Rating (Long-Term ICR) of A (Excellent) of National Western Life Insurance Company are under review with negative implications.
Ozark National Life Insurance Company, a subsidiary of National Western, is also placed under reviews with negative implications.
This move reflects the complexities tied to the impending merger and the uncertainties regarding post-acquisition rating fundamentals.
The $1.9 billion cash transaction has prompted AM Best to conduct a comprehensive assessment, raising questions about the impact of financing on regulatory capital positions.
In contrast, Prosperity Life Group’s subsidiaries maintain their stable ratings. Their FSR will remain A- (Excellent) and their Long-Term ICR will also remain A- (Excellent).
This showcases confidence in the positive outcomes of the merger on scale, liabilities profile, and capitalization.
How does AM Best’s credit ratings impact the merger’s complexity?
AM Best’s affirmation of Prosperity Life Group’s subsidiaries’ ratings provides reassurance amid the evolving landscape of insurance mergers.
Shenandoah Life Insurance Company, SBLI USA Life Insurance, Inc., Prosperity Life Assurance Limited, and S.USA Life Insurance Company, Inc. will not see changes in their ratings.
This signals confidence in the preservation and enhancement of Prosperity Life Group’s business fundamentals.
As the merger progresses, plans to re-domesticate National Western Life Insurance Company and maintain Ozark National Life Insurance Company’s domicile in Missouri add strategic intricacies.
AM Best commits to vigilant monitoring to assess the impact on operating insurance entities under Prosperity Life Group.