AM Best Affirms Credit Ratings of Meiji Yasuda Life Insurance Company’s U.S. Subsidiaries: Standard Insurance Group and Pacific Guardian Life Insurance Company, Limited

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” (Excellent) of Standard Insurance Company (Portland, OR) and its affiliate, The Standard Life Insurance Company of New York (White Plains, NY), together referred to as the Standard Insurance Group (The Standard). Additionally, AM Best has affirmed the Long-Term ICR of “bbb+” (Good) and the Long-Term Issue Credit Rating (Long-Term IR) of “bbb+” (Good) on the outstanding $250 million 5% senior unsecured notes, due 2022, of StanCorp Financial Group, Inc. (StanCorp Financial) (Portland, OR), the intermediate holding company of The Standard.

Concurrently, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) of Pacific Guardian Life Insurance Company, Limited (Pacific Guardian) (Honolulu, HI). The outlook of these Credit Ratings (ratings) is stable.

The ratings of The Standard and Pacific Guardian take into consideration the financial strength of their parent, Meiji Yasuda Life Insurance Company and the strategic role they play as U.S. subsidiaries of the parent.

The ratings of The Standard reflect its balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

The Standard has a strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which has been maintained over the past year despite material top line growth, lower net earnings and dividend payments to its parent. The Standard holds a significant amount of invested assets in commercial mortgage loans that are considered higher risk and less liquid. However, the company has a long history with commercial mortgage loan underwriting. The Standard is the originator of the mortgages, actively manages the portfolio and holds them to maturity. The portfolio has performed very well and has had minimal impacts due to economic pressure from the COVID-19 pandemic to date.

The Standard’s operating earnings have compressed but remain favorable. Its return metrics remain strong and top line growth has been robust over the past three years from both premium revenue and fee income from the company’s asset management business. Revenue and earnings are well-diversified with all lines of business contributing favorable to operating earnings. Nevertheless, earnings are pressured from increased life and disability claim experience from the COVID-19 pandemic, as well as declining interest rates. The Standard maintains a favorable market position in each of its core insurance product lines and assets under management has shown strong growth over the past two years driven predominantly by the retirement business. The Standard has a well-established ERM program with appropriate controls and governance structure. Stress testing is completed annually and there are explicit risk tolerance levels.

The ratings of Pacific Guardian reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, limited business profile and appropriate ERM.

Pacific Guardian has consistently maintained the strongest level of risk-adjusted capital, as measured by BCAR. Capital and surplus growth has moderated based on dividends to its parent and near term net losses. This has been offset by a decline in business risk as premium revenues have contracted. Invested assets have a material exposure to commercial mortgages with geographic concentration in the Pacific Northwest. However, the portfolio has a very low delinquency rate and the portfolio is actively managed by Pacific Guardian.

Premiums have been declining due to decreased new life sales and decreased employee counts for the company’s temporary disability income (TDI) business. The company has introduced a new product, expanded distribution and geographic reach to address the decline in new life sales. TDI’s premium revenue is starting to recover as the economic pressure on the economy of Hawaii from COVID-19 lessens. Claims experience from COVID-19 has driven the company to report a small net loss for 2020. The company expects to return to profitability over the next year based on top line growth initiatives and moderation of COVID-19 claims.

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 Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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