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BEST'S CREDIT RATING ACTION

Best’s News & Research Service - November 17, 2022 11:48 AM (EST)

AM Best Affirms Credit Ratings of Delphi Financial Group, Inc. and Its Subsidiaries

  • November 17, 2022 11:48 AM (EST)

Oldwick //BestWire// - AM Best has affirmed the Financial Strength Rating of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa+” (Superior) of the life/health subsidiaries of Delphi Financial Group, Inc. (DFG) (Wilmington, DE): Reliance Standard Life Insurance Company (Schaumburg, IL) and First Reliance Standard Life Insurance Company (New York, NY) (together referred to as Reliance Standard). AM Best also has affirmed the FSR of A++ (Superior) and the Long-Term ICRs of “aa+” (Superior) of DFG’s property/casualty subsidiaries: Safety National Casualty Corporation, Safety Specialty Insurance Company (both domiciled in St. Louis, MO) and Safety First Insurance Company (Chicago, IL) (together referred to as Safety National). DFG is a direct subsidiary of Tokio Marine & Nichido Fire Insurance Co., Ltd., whose ultimate parent is Tokio Marine Holdings, Inc. (Tokio Marine), Japan’s largest non-life insurance organization. In addition, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) of Standard Security Life Insurance Company of New York (SSL) (New York, NY). The outlook of these Credit Ratings (ratings) is stable.

Concurrently, AM Best has affirmed the Long Term ICR of “a+” (Excellent) and the Long-Term Issue Credit Ratings (Long-Term IR) of DFG. Lastly, AM Best has affirmed the Long-Term IRs of “aa+” (Superior) on the outstanding medium term notes issued under the funding agreement backed-securities program of Reliance Standard Life Global Funding II. The outlook of these ratings is stable. (Please see below for a detailed list of the Long-Term IRs.)

The ratings of Reliance Standard reflect its balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and very strong enterprise risk management (ERM). Reliance Standard’s ratings also primarily reflect a high degree of integration and strategic importance to its ultimate parent, Tokio Marine. In addition, the company maintains a very strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and favorable operating results, despite some spread compression within its interest-sensitive annuity business. While the group life division has been challenged by COVID-19-related headwinds in 2020 and 2021, the results in the first half of 2022 have improved materially. The ratings also consider Reliance Standard’s very strong risk management capabilities, a reasonable level of financial and operating leverage and favorable interest coverage ratios at DFG, its intermediate holding company.

Partially offsetting these positive rating factors are elevated levels of higher risk and less liquid assets within its general account investment portfolio, including commercial mortgage loans. The company’s exposure to below-investment-grade bonds is well above industry averages. While the company’s overall liability profile has shifted more toward interest-sensitive annuities, which AM Best views as a less creditworthy product line, spreads remain favorable despite some spread compression due to the prolonged low interest rate environment.

The ratings of Safety National reflect its balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and very strong ERM. Safety National’s ratings also consider its strongest level of risk-adjusted capitalization, as measured by BCAR, historically profitable overall operating performance and specialized market profile as an industry leader in excess workers’ compensation. Partially offsetting these positive rating factors are ongoing adverse development attributed to the company’s nature of business and the group’s somewhat constrained business profile, as excess workers’ compensation generates a significant amount of the group’s premiums. Despite these concerns, the ratings recognize Safety National’s solid overall profitability and AM Best’s expectation of a continued generating of retained earnings.

The ratings of SSL reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, limited business profile and appropriate ERM. SSL’s ratings also reflect a high degree of integration and strategic importance to its ultimate parent, Tokio Marine. The company maintains the strongest level of risk-adjusted capitalization, as measured by BCAR, with a conservative portfolio mainly consisting of investment-grade fixed-income securities. SSL’s operating performance has been positive over the past five years with a sharp increase in both profitability and premiums in 2021 due to large rate increases in its Paid Family Leave product. Partially offsetting these positive rating factors is the company’s somewhat constrained business profile given its product and geographic concentration.

The following Long-Term IR has been assigned with a stable outlook:

Reliance Standard Life Global Finding II—

— “aa+” (Superior) on $400 million 4.928% senior secured medium term notes, due 2027

The following Long-Term IRs has been affirmed with stable outlooks:

Delphi Financial Group, Inc.—

— “a-” (Excellent) on $175 million fixed/floating rate junior subordinated debentures, due 2037

Reliance Standard Life Global Funding II— “aa+” (Superior) program rating

— “aa+” (Superior) on all outstanding notes issued under the program

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.



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