A.M. Best Downgrades Ratings of National Financial Group, Its Members and National Life Insurance Company

Business Wire, June 22, 2009

OLDWICK, N.J. -- A.M. Best Co. has downgraded the financial strength rating (FSR) to B (Good) from A- (Excellent) and issuer credit ratings (ICR) to “bbb” from “a-”of National Financial Group (NFG) and its members. The group consists of National Insurance Company (NIC) and National Group Insurance Company (NGIC) (Coral Gables, FL). Concurrently, A.M. Best has downgraded the FSR to B (Good) from A- (Excellent) and ICR to “bbb ” from “a-” of National Life Insurance Company (NALIC). The outlook for all ratings is negative. All companies are domiciled in San Juan, PR, unless otherwise specified.

These rating actions for NFG’s are the result of its continued poor operating performance, surplus erosion and geographic concentration of risk. While management has taken several initiatives to protect policyholders and its capital position, including a capital infusion, enhanced data management and the development of a solid reinsurance program, the group has failed to achieve expected underwriting results in recent years, with a continued weak performance projected for 2009. Additionally, given NFG’s geographic concentration of risk with all business generated in Puerto Rico and Florida, capital remains exposed to weather-related catastrophe losses. While this is partially mitigated by a solid reinsurance program, which protects NFG from shock losses and reduces net exposures to a manageable level, it leaves the group more heavily reliant on reinsurance than its peers.

Somewhat offsetting these negative factors are NFG’s continued solid capitalization, albeit reduced, historically profitable operating performance, and its well recognized brand name through writing business in Puerto Rico for over 40 years.

The rating actions on NALIC are in response to the downgrading of the ratings of NFG, cross ownership between NFG and NALIC, along with NALIC’s declining net operating income.

Somewhat offsetting these negative rating factors are NALIC’s adequate level of risk-adjusted capitalization, generally positive operating results and its solid name recognition in the Puerto Rico market.

For Best’s Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.