OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has affirmed the financial strength rating of B (Fair) and issuer credit ratings of “bb” 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 the ratings has been revised to stable from negative. Subsequently, A.M. Best has withdrawn the ratings as the company has requested to no longer participate in A.M. Best’s interactive rating process.
The ratings reflect SBLI USA Group’s ongoing realized capital losses resulting primarily from its significant investment concentration in real estate-related asset classes, including commercial mortgage-backed securities, non-agency residential mortgage-backed securities (with some exposure to the sub-prime and Alt-A residential mortgage markets), direct investments in real estate held for sale and real estate limited partnerships. In addition, the ratings reflect the group’s relatively modest risk-adjusted capital position following substantial declines in absolute capital and surplus over the past few years. The ratings also reflect SBLI USA Group’s limited business profile, as it is has not been writing new business since June 2010.
In revising the outlook to stable from negative, A.M. Best notes that the absence of statutory new business expense strain has led to a significant improvement in operating earnings in 2011. Additionally, SBLI USA Group realized a material increase in statutory surplus primarily driven by unrealized capital gains. These gains represent a partial offset to the large decline in statutory surplus reported in 2010, which was triggered principally by substantial unrealized investment losses resulting from mark to market adjustments precipitated by the NAIC’s reclassification of certain commercial mortgage-backed securities.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Life/Health Insurers”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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