Jan 24 - Fitch Ratings has affirmed the Insurer Financial Strength (IFS) ratings of Minnesota Life Insurance Company (Minnesota Life) and its subsidiary, Securian Life Insurance Company at 'AA-'. Fitch has also affirmed the rating on Minnesota Life's surplus notes at 'A'. The Rating Outlook is Stable. The rating affirmation reflects Minnesota Life's strong balance sheet fundamentals and conservative risk profile. The ratings also consider the company's moderately weak earnings relative to similarly rated peers, as well as macroeconomic challenges and a strong competitive environment in its core markets, within which the company often faces insurers with greater scale and resources. Minnesota Life's strong balance sheet fundamentals reflect the company's solid capitalization, low operating leverage, and low financial leverage. The company's risk-adjusted capitalization, which is a key factor supporting the company's ratings, remained strong and stable in 2012. The company reported a risk-based capital (RBC) ratio of 518% of the company action level at Dec. 31, 2011, and Fitch expects the company to report and RBC ratio in excess of 500% for Dec. 31, 2012. In addition to the company's strong risk-adjusted capitalization, Minnesota Life's solid balance sheet fundamentals are supported by its low statutory operating leverage of 4.6x as measured by adjusted liabilities to total adjusted capital, as well as low financial leverage of approximately 5% on a GAAP basis. Fitch notes that Minnesota Life's liquidity profile continues to be very favorable. The company's results benefit from its large, investment-grade, publicly traded bond portfolio and stable liability structure. Minnesota Life's conservative risk profile reflects balanced, diversified sources of revenue that serve to moderate earnings volatility, although growth in fee income related to capital market performance could add further volatility in the future. While the company's product lines have produced below average combined profitability relative to similarly rated peers, Fitch acknowledges that the company's products are reflective of management's mutual insurance company philosophy. Fitch also takes a favorable view of Minnesota Life's high quality career agency distribution channel and strong technology-based service platform, which Fitch considers to be beneficial to its group life and retirement services product lines. Fitch expects Minnesota Life's near-term operating profitability to moderate somewhat, as recently favorable mortality experience reverts to historical averages. Over the course of 2013, Fitch anticipates the company's profitability as measured by GAAP-based return on equity to be between 6% and 7%, which is within current rating expectations. In addition, Fitch believes that intense market competition will continue to challenge the company in its efforts to generate profitable top line growth over the next year, and low interest rates will likely pressure spread income. Minnesota Life, the primary operating subsidiary of Securian Financial Group, is headquartered in St. Paul, Minnesota and reported total admitted assets of approximately $28.1 billion and capital and surplus of $2.1 billion at Sept. 30, 2012. SENSITIVITY/RATING DRIVERS The key rating triggers that could result in an upgrade include: --Sustained strengthening of capitalization, including a company action level risk-based capital (RBC) ratio above 600% with strong capital quality; --Sustained strengthening of financial results, including a GAAP operating return on equity of 10% or higher. The key rating triggers that could result in a downgrade include: --Significant deterioration in financial results that include sustained GAAP operating return on equity below 4%; --A sustained decline in the company's RBC ratio to a level below 450% and an increase in financial leverage above 15% as measured by debt-to-total capital. Fitch affirms the following ratings with a Stable Outlook: Minnesota Life Insurance Company --IFS at 'AA-'; --Issuer Default Rating at 'A+'; --$120 million Rule 144a surplus notes 8.25% due 2025 at 'A'. Securian Life Insurance Company --IFS at 'AA-'.