Best’s News & Research Service - May 18, 2007 11:06 AM (EDT)
A.M. Best Upgrades and Assigns Ratings to Standard Life Insurance Company of Indiana
OLDWICK, N.J. //BestWire// - A.M. Best Co. has upgraded the financial strength rating to B++ (Good) from B+ (Good) and has assigned an issuer credit rating (ICR) of “bbb” to Standard Life Insurance Company of Indiana (Standard Life) (Indianapolis, IN). The outlook for the FSR is being revised to stable from positive, while the outlook assigned to the ICR is stable.
These rating actions reflect A.M. Best’s continued favorable view of the long-term commitment of the Capital Assurance Corporation (CAC) (Prospect, KY), a private investment firm, to strengthen the risk-adjusted capitalization of Standard Life. CAC acquired all the capital stock and surplus debentures of Standard Life and Dixie National on June 9, 2005.
Since its acquisition by CAC, Standard Life’s statutory capital levels have increased primarily through retained earnings, proceeds from the sale of its non-core ordinary life segment, and capital contributions made by CAC. The statutory capital and surplus growth, combined with a rebalancing of Standard Life’s asset portfolio to enhance overall liquidity, reduce mismatch risk and improve yield has enhanced the company’s risk-adjusted capitalization.
These rating actions also reflect Standard Life’s improved asset/liability management process and hedging strategy that support its annuity businesses. Furthermore, recent product development activities have been focused on insulating the company from both spread compression and liquidity risk.
Offsetting these strengths is Standard Life’s limited business profile as a monoline annuity writer, as well as the ongoing challenges to profitably grow its businesses in the highly competitive fixed annuity arena. Standard Life competes against larger life insurance carriers with greater financial flexibility and marketing depth, as well as other players including banks and mutual funds.
Additionally, CAC’s overall capital structure includes surplus notes that are required to be serviced by Standard Life. However, A.M. Best notes that CAC’s financial leverage and coverage ratios are within the guidelines for its current ratings.
For Best’s Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.