AM Best

A.M. Best Downgrades Ratings of SBLI USA Mutual Life Insurance Company, Inc. and Its Subsidiary

Steven Faulks
Senior Financial Analyst
(908) 439-2200, ext. 5035

Thomas Rosendale
Assistant Vice President
(908) 439-2200, ext. 5201

Rachelle Morrow
Senior Manager, Public Relations
(908) 439-2200, ext. 5378

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644


OLDWICK, N.J. - FEBRUARY 28, 2011 12:00 AM (EST)
A.M. Best Co. has downgraded the financial strength rating to B (Fair) from B+ (Good) and issuer credit ratings to "bb" from "bbb-" of SBLI USA Mutual Life Insurance Company, Inc. (SBLI USA) (New York, NY) and its wholly owned subsidiary, S.USA Life Insurance Company, Inc. (Phoenix, AZ). The two companies are collectively referred to as the SBLI USA Group. The outlook for all ratings is negative.

The ratings reflect SBLI USA's statutory results at year-end 2010, which show a material decline in the company's absolute level of capital and surplus. This decline was triggered primarily by substantial unrealized investment losses generated due to "mark to market" adjustments precipitated by the NAIC's reclassification of certain commercial mortgage-backed securities. Additionally, approximately $20 million of one-time costs associated with the group's restructuring strategies added to the decline. Based on Best's Capital Adequacy Ratio (BCAR), these reduced levels of capital and surplus could no longer support the company's previous ratings.

In maintaining the negative outlook, A.M. Best remains concerned that SBLI USA's overall investment concentration in real estate (that also includes non-agency residential mortgage-backed structured securities—with some exposure to the sub-prime and Alt-A residential mortgage markets—and its direct investments in real estate held for sale and limited real estate partnerships), could be at risk for additional investment losses should the U.S.' fragile economic recovery stall or deteriorate.

Offsetting these factors is the group's positive operating performance that A.M. Best believes should return to a more normalized level going forward as the group continues to manage its existing insurance businesses.

The principal methodology used in determining these ratings is Best's Credit Rating Methodology - Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Understanding BCAR for Life and Health Insurers" and "Rating Members of Insurance Groups." Methodologies can be found at

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.

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