AM Best affirms AuguStar, Constellation ratings with stable outlook

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AM Best affirms Constellation ratings

Highlights

AM Best affirms AuguStar Life Group's A rating, National Security Life and Annuity Company's A- rating, and Constellation Insurance's 'bbb+' issuer rating with stable outlooks.
Constellation's $425 million 5.55% senior notes due 2030 and $250 million 6.625% notes due 2031 remain rated 'bbb+', while AuguStar Life Insurance’s $250 million 6.875% surplus notes due 2042 are rated 'a-'.
AuguStar maintains very strong balance sheet strength and risk-adjusted capitalization, supported by diversified revenues, liquidity, and expanding U.S. and international operations.

Rating action covers insurers and debt issues

As reported by AM Best, the agency affirms the Financial Strength Rating of A and the Long-Term Issuer Credit Rating of "a+" for AuguStar Life Insurance Company, referred to as AuguStar Life Group, while also affirming the Financial Strength Rating of A- and the Long-Term Issuer Credit Rating of "a-" for National Security Life and Annuity Company, which is domiciled in New York. It also affirms the Long-Term Issuer Credit Rating of "bbb+" for parent company Constellation Insurance, Inc., and keeps the outlook on these ratings stable.

The action also includes affirmed Long-Term Issue Credit Ratings for Constellation and AuguStar Life Insurance Company. Constellation's affirmed debt ratings cover $425 million of 5.55% senior unsecured notes due January 2030 and $250 million of 6.625% senior unsecured notes due May 2031, both at "bbb+". AuguStar Life Insurance Company's $250 million of 6.875% surplus notes due June 2042 remain rated "a-".

Capital strength supports insurance operations

AuguStar's ratings reflect what AM Best assesses as very strong balance sheet strength, strong operating performance, a neutral business profile and appropriate enterprise risk management. The group continues to manage risk-adjusted capital at the strongest level under Best's Capital Adequacy Ratio, with capital viewed as more than sufficient for its insurance, investment and business risks across U.S. domestic and international operations.

AM Best says AuguStar also benefits from strong liquidity and financial flexibility through its membership in the Federal Home Loan Bank and through parent Constellation. Its operating performance is supported by diversified revenue sources, expanding distribution channels and growth in domestic and international markets, while management embeds risk appetite and tolerances into strategic planning to monitor emerging and ongoing risks.

For NSLAC, the agency cites very strong balance sheet strength, adequate operating performance, a very limited business profile and appropriate enterprise risk management. The ratings also reflect AuguStar's commitment to the subsidiary and its management of the run-off variable annuity block, with that risk mitigated through reinsurance, while the unit continues to hold the strongest level of risk-adjusted capitalization and strong liquidity for its remaining risks.

Sovereign borrowing risks in a higher-rate environment were the focus of our earlier coverage, highlighting how persistent geopolitical shocks and elevated fiscal spending can erode fiscal headroom and strain refinancing. We noted that emerging and frontier markets are especially exposed because interest-service burdens tend to be high relative to narrower revenue bases, while inflation pressures linked to geopolitical conflicts can further complicate credit outlooks.

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