Fitch Affirms Minnesota Life's IFS at 'AA'; Outlook Stable

Business Wire,  August 2, 2006  

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CHICAGO -- Fitch has affirmed the insurer financial strength (IFS) rating of Minnesota Life Insurance Company (Minnesota Life) and its New York subsidiary, Northstar Life Insurance Company, at 'AA'. Fitch also affirms the 'AA-' Issuer Default Rating (IDR) and the 'A+' rating on the surplus notes of Minnesota Life. Additionally, Fitch has assigned an 'AA' rating to Securian Life Insurance Company (Securian Life), a subsidiary of Minnesota Life.

The Rating Outlook is Stable. A complete list of ratings follows at the end of this release.

Fitch's ratings are based on Minnesota Life's conservative risk profile, which includes very strong risk-adjusted capital, diversified revenue and profitability streams from its five business divisions, and low operating and financial leverage. Fitch also views favorably the company's success in several niche markets including the large-case group life insurance market, as well as the credit union and mortgage-related life insurance marketplace. Fitch believes the company's diversified products and target markets reduce risk due to changes in the operating environment, capital markets and macro events. In addition, Fitch views Minnesota Life's high quality bond and mortgage investment portfolio as a strength.

Fitch's concerns include the volatility of statutory capital, which is driven by material capital markets exposures on both the investment and product sides and the company's moderate profitability. Fitch notes that Minnesota Life's greater than average exposure to common stocks and private equity investments has created heightened levels of surplus volatility, but also has produced capital appreciation over the long run. Going forward, Fitch believes that the company's strategic plans to increase on the margin fixed rate assets and fixed insurance and annuity products could reduce surplus volatility. Other concerns include a lack of critical mass in its individual annuity line of business and the highly competitive markets in which Minnesota Life's business segments operate.

While Minnesota Life reported good top line growth in 2005, favorable profitability comparisons with 2004 results and a five year high return on equity of 8.9%, Fitch considers the company's profitability as moderate as compared to many 'AA' rated companies. Fitch notes that all five business divisions reported solid results in 2005 and that increases in 2005 operating earnings resulted primarily from improved investment margins, expense margins and subsidiary earnings, offset by higher mortality results.

Fitch's Stable Rating Outlook is driven by expectations that Minnesota Life will maintain its strong balance sheet with very strong risk-adjusted capital, low operating and financial leverage, and a high-quality fixed-income portfolio. Fitch believes that Minnesota Life will exhibit moderate improvement in 2006 GAAP core operating results, but that net income could decline modestly. While Fitch does not expect any significant merger activity in 2006, the company is expected to be an opportunistic buyer of blocks of business or distribution in support of its growth strategy.

Minnesota Life, the main operating subsidiary of Securian Financial Group (SFG), is headquartered in St. Paul, Minnesota and reported total assets of over $21.6 billion and capital and surplus of $1.6 billion at March 31, 2006. Ownership of Securian Life was transferred from SFG to Minnesota Life in the form of a stock dividend in 2005. Securian Life reported capital and surplus of $113 million after receiving a $100 million capital contribution from Minnesota Life at Dec. 31, 2005.

Fitch affirms the following ratings with a Stable Outlook:

Minnesota Life Insurance Company

--IDR 'AA-';

--IFS 'AA';

--$125 million Rule 144a surplus notes 8.25% due 2025 'A+'.

Northstar Life Insurance Company

--IFS 'AA'.

Fitch assigns the following rating with a Stable Outlook.

Securian Life Insurance Company

--IFS 'AA'

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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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