FITCH AFFIRMS NAVY MUTUAL AID ASSOCIATION'S 'A+' IFS RATING

Fitch Ratings-Chicago-03 June 2009: Fitch Ratings has affirmed Navy Mutual Aid Association's (NMAA) 'A+' Insurer Financial Strength (IFS) rating. The Rating Outlook is Stable.

NMAA's IFS rating reflects the association's very strong capital levels, high quality, liquid
investment portfolio, favorable business profile with predominantly traditional life insurance liabilities and strong niche position as a low cost provider of insurance protection products to the United States sea services and their families.

Fitch views as additional strengths NMAA's conservative reserving, excellent persistency, low mortality and consistently low expense ratios. Fitch believes that NMAA's 'war risk' is prudently managed and that mortality experience is within expectations despite the current conflicts in the Middle East.

Fitch believes NMAA to a great extent has endured the pressures of the recent economic and financial market turmoil as exhibited by maintaining solid capital strength and positive earnings due to their conservative business and financial profiles. NMAA's liability financial profile is composed of predominately term and whole life insurance products with no variable annuity products or guarantees. NMAA investment portfolio is composed of over 44% U.S. government or government sponsored enterprise debt, high quality corporate bonds and has no exposure to problematic, structured securities. Financial flexibility is considered adequate in respect to NMAA's unique business profile, and product portfolio.

The Stable Outlook is driven by NMAA's solid results under Fitch's stress scenarios and
expectations for consistent operating earnings in 2009 driven by low cost operations and the association's ability to change policyholder dividends in response to potential challenges.

Rating concerns include limited access to capital markets and NMAA's 22% decline in capital in 2008 driven by a $54 million change in unrealized capital losses in its common stock portfolio. Offsetting the decline is NMAA's $204 million net unrealized capital gain position in its bond portfolio at year-end 2008, despite over $93 million in unrealized capital losses in its corporate bond holdings. Fitch notes that NMAA has only $25 million in below investment grade bonds and that its risky asset ratio compares very favorably with the life insurance industry at year-end 2008.
 
Fitch views favorably NMAA's continued diversification of its investment portfolio as a strategy to diminish exposure to common stock price volatility. NMAA's common stock investments have declined to an industry level allocation at year-end 2008. Fitch notes that while NMAA's has lower than average credit related risk, interest rate risk is moderately increased due to the longer than average bond portfolio duration that is driven by its member and product profile.

Fitch expects NMAA will maintain a solid balance sheet in 2009 with strong capital levels as measured by Prism and a high-quality, liquid investment portfolio. Fitch expects NMAA to report good operating performance in 2009, driven by low expenses, strong levels of investment income and low credit-related investment losses. Fitch believes NMAA will exhibit renewed premium growth in 2009, driven by a successful marketing outreach to its membership base, moderate geographic expansion and strong comparative product value.

NMAA serves active, reserve and retired members of the U.S. Navy, U.S. Marine Corps, U.S. Coast Guard, U.S. Public Health Service (USPHS), National Oceanic and Atmospheric Administration (NOAA) and had total assets of approximately $2.2 billion at year-end 2008. The association in located in Arlington, VA and currently has approximately 100,000 members and more than $19.0 billion of insurance in force.

Fitch affirms the following, with a Stable Outlook:
Navy Mutual Aid Association
--IFS at 'A+'.

Contact: R. Andrew Davidson CFA, +1-312-368-3144 or Julie A. Burke, CPA, CFA
+1-312-368-3158, Chicago.

Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email:
brian.bertsch@fitchratings.com.
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.