NEW YORK, Dec. 7 /PRNewswire/ -- Standard & Poor's today affirmed its
ratings on Security Benefit Life Insurance Co. and First Security Benefit Life
Insurance and Annuity Co. of NY., collectively, Security Benefit Life (see
list below), the major life insurance and annuity entities in the Security
Benefit group of companies.
The outlook is stable.
The rating affirmations reflect Security Benefit Life's very strong
position in the tax-sheltered annuity market, its very strong operating
performance, its extremely strong capitalization, and its improved asset and
liability risk profile. Partially offsetting these strengths are the
challenges the company faces in diversifying its business profile and managing
its level of liquidity.
Major Rating Factors:
-- Security Benefit Life has a very strong business profile due to its
well-established position in the tax-sheltered annuity market, specifically in
the retail 403(b) market segment. The insurer holds a top-10 market share
position in the K-12 public school market segment. As a result of its large
percentage of qualified variable annuity business, its longstanding
distribution relationships, and its target market, the company is less
sensitive to interest rate risk compared with other annuity companies.
Security Benefit Life's solid business position is sustainable because the
high barriers of entering the 403(b) market somewhat restrict increased
competition. The company's core annuity retail sales increased 28% through
Sept. 30, 1999, due to improved agent productivity and an increase in
-- Although Security Benefit Life maintains a very strong business
position in the tax-sheltered annuity market, the company's operational
profile is concentrated because 100% of its policy reserves are annuities.
Diversification is achieved through revenues generated by Security Management
Co. LLC, with customer accounts and assets in mutual fund products.
-- Standard & Poor's views Security Benefit Life's operating performance
as very strong, as measured by Standard & Poor's earnings adequacy ratio of
316% at Dec. 31, 1998, and GAAP return on assets (ROA) of 81 basis points
through Sept. 30, 1999. Security Benefit Life's consistently strong annuity
earnings profile is supported by its increasing asset base, its low-cost
structure, and its good expense control.
-- Standard & Poor's believes Security Benefit Life's capitalization is
extremely strong, as measured by Standard & Poor's capital adequacy ratio of
466% at Dec. 31, 1998. Capitalization is expected to fall but will remain
within the extremely strong area due to strategic initiatives focused on
further improving the company's business profile.
-- Security Benefit Life's investment portfolio is very strong from a
credit quality and risk-return standpoint. The company's investment portfolio
consists of high-quality, fixed-income securities. Its below-investment-grade
holdings are 8% of invested assets, and Standard & Poor's believes Security
Benefit Life will maintain this level for the next few years. In recent years,
the company has reduced its mortgage-backed securities holdings to less than
20%, with current cash flow invested in high-grade corporate and asset-backed
-- Security Benefit Life's liquidity is good, as measured by Standard &
Poor's liquidity ratio of 156%, the strong persistency of its annuity
liabilities, and the company's extremely strong capitalization. Although
liquidity is considered good, Security Benefit Life remains challenged in
managing its liquidity due to its growth in variable rate funding agreements
and high percentage of annuity reserves without surrender charges.
Security Benefit Life is a Security Circle insurer, which means that it
voluntarily underwent Standard & Poor's most comprehensive analysis and was
assigned a rating in the top four categories for financial security.
Standard & Poor's believes Security Benefit Life will be able to sustain
its GAAP earnings adequacy ratio in the 300% area due to its increasing asset
base and expense control management. Core retail annuity sales are expected to
increase 6%-8%, while assets under management are expected to increase
8% based on variable asset growth. Institutional liabilities are expected to
remain below 20% of general account liabilities, and capitalization is
expected to remain extremely strong, Standard & Poor's said. -- CreditWire
Security Benefit Life Insurance Co.
Counterparty credit rating AA-/A-1+
Financial strength rating AA-/A-1+
Surplus notes A
First Security Benefit Life Insurance and Annuity Co. of NY
Financial strength rating AA-
SOURCE Standard & Poor's