Published: December 22, 2009
A.M. Best Affirms Ratings of Delphi Financial Group, Inc. and Its Life Subsidiaries; Maintains Negative Outlook
OLDWICK, N.J. - (BUSINESS WIRE) - A.M. Best Co. has affirmed the issuer credit rating (ICR) of
"bbb" of Delphi Financial Group, Inc. (Delphi Financial)
(Wilmington, DE) [NYSE:DFG]. A.M. Best also has affirmed the financial
strength rating (FSR) of A (Excellent) and ICRs of "a" of Delphi
Financial's primary life insurance subsidiaries, Reliance Standard
Life Insurance Company (Reliance Standard) (Chicago, IL) and First
Reliance Standard Life Insurance Company (New York, NY).
Concurrently, A.M. Best has affirmed all debt ratings of Delphi
Financial and Reliance Standard Life Global Funding (Illinois).
The outlook of all ratings remains negative. (See below for a detailed
listing of the companies and ratings.)
A.M. Best continues to maintain a negative outlook on Delphi Financial
and its life insurance subsidiaries due to their above average level of
investment risk and subpar investment performance. Delphi's investment
philosophy has historically been more aggressive than many of its peer
companies.
Reliance Standard currently holds a sizeable portion of its invested
assets in structured securities, including non-agency residential
mortgage-backed securities, which have experienced considerable rating
downgrades over the past twelve months. Additionally, through the first
nine months of 2009, Reliance Standard reported large realized capital
losses tied to the company's fixed income portfolio. However, A.M. Best
notes, like the rest of the life/health industry, its unrealized loss
position has significantly improved since March 31, 2009.
Reliance Standard continues to report consistent operating results and
has an established presence in the small to mid-sized employee benefit
market, where it focuses primarily on group disability income and group
life product offerings. The company has reported moderate premium growth
and favorable persistency in its book of business, despite the weak
economy. Thus far, there has been no evidence of an economic impact
regarding claims incidence reported, and loss ratios remain stable.
However, aggressive pricing continues to be observed within the employee
benefits market, which has potential to further pressure the company's
sales going forward. Reliance Standard gains additional diversification
through its growing asset accumulation business as well as its portfolio
of voluntary offerings and its limited benefit medical offering.
Delphi Financial continues to maintain an appropriate level of capital
to support its current insurance risk. Debt-to-capital position remains
at an acceptable level at 23.5% as of September 30, 2009. Delphi
Financial raised capital earlier this year through two separate common
equity offerings totaling $121 million and several capital contributions
to Reliance Standard to bolster its capital position, which more than
offset the large amount of realized capital losses. A.M. Best also
expects that the forthcoming NAIC/ PIMCO ratings "remigration" of the
company's non-agency residential mortgage-backed securities will also
add positively to its year-end risk-adjusted capital position.
The ICR of "bbb" has been affirmed for Delphi Financial Group, Inc.
The following debt ratings have been affirmed with a negative outlook:
Delphi Financial Group, Inc.-
-- "bbb" on $143.8 million 8% senior unsecured notes, due 2033
-- "bb+" on $175.0 million 7.376% fixed/floating rate junior
subordinated debentures, due 2037
Reliance Standard Life Global Funding-"a" program rating
-- "a" on $65 million 5.625% medium-term notes (MTNs), due 2011
The following indicative ratings have been affirmed with a negative
outlook for debt securities available under the shelf registration:
Delphi Financial Group, Inc.-
-- "bbb" on senior unsecured debt
-- "bbb-" on subordinated debt
-- "bb+" on preferred stock
Delphi Finance Trust I –
--"bb+" on preferred securities
For Best's Credit Ratings, an overview of the rating process and rating
methodologies, please visit www.ambest.com/ratings.
The principal methodologies used in determining these ratings, including
any additional methodologies and factors that may have been considered,
can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service credit
rating organization dedicated to serving the financial and health care
service industries, including insurance companies, banks, hospitals and
health care system providers. For more information, visit www.ambest.com.
A.M. Best
Analysts:
Kathryn Steffanelli,
908-439-2200, ext. 5063
kathryn.steffanelli@ambest.com
Carl
Austin, 908-439-2200, ext. 5500
carl.austin@ambest.com
or
Public
Relations:
Jim Peavy, 908-439-2200, ext. 5644
james.peavy@ambest.com
Rachelle
Morrow, 908-439-2200, ext. 5378
rachelle.morrow@ambest.com
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