A.M. Best Affirms Ratings of StanCorp Financial Group, Inc. and Its Subsidiaries
September 23 2014 - 2:43PM
Business Wire
A.M. Best has affirmed the financial strength rating
(FSR) of A (Excellent) and the issuer credit ratings (ICR) of “a”
of the insurance subsidiaries of StanCorp Financial Group,
Inc. (StanCorp) [NYSE:SFG]: Standard Insurance Company
and The Standard Life Insurance Company of New York.
Collectively, the group is referred to as Standard Insurance
Group (The Standard) (headquartered in Portland, OR).
Concurrently, A.M. Best has affirmed the ICR of “bbb” and the
existing debt ratings of StanCorp. The outlook for all ratings is
stable. (See below for a detailed listing of debt ratings.)
The ratings reflect The Standard’s established presence in the
market for employee benefits as it remains a top 10 provider of
group disability income and group life products. The company
continues to generate strong statutory and GAAP earnings,
facilitating growth in capital which A.M. Best believes is
currently sound.
While recent earnings have been modestly impacted by some claims
volatility in the insurance services segment, this has been offset
by increasing earnings in the asset management segment driven by
growth in assets under management. Additionally, rate increases
implemented over the past few years along with expense management
initiatives have enhanced product profitability. Moreover, recent
debt paydowns have reduced StanCorp’s financial leverage and
improved interest coverage ratios, which remain well within A.M.
Best’s expectations for the current ratings.
While operating results remain favorable, The Standard continues
to face a competitive pricing environment within its core group
life and disability product lines. This, coupled with continued
economic uncertainty pressuring revenue growth and investment
income, creates a challenging environment for group disability
income carriers. Moreover, although The Standard continues to be
successful in investing in niches within the commercial mortgage
loan asset class, the group’s exposure is considerable relative to
its capital and surplus position as well as to peers. The sheer
size of the portfolio, the significant exposure to retail and
office property types, and the geographic concentration of the
loans (in California and the Pacific Northwest) expose The Standard
to certain market, economic and natural disaster risks. However,
A.M. Best notes that the holdings have a low average loan size,
minimal delinquency rates, and most loans are written with personal
guarantees from the borrowers.
A.M. Best believes that a positive rating action for StanCorp or
its subsidiaries is unlikely over the near to medium term. A
negative rating action could result from deterioration in operating
results due to elevated benefit ratios, significant spread
compression within interest-sensitive liabilities, or a material
increase in investment losses within the commercial mortgage loan
portfolio, which could lead to a considerable decline in
risk-adjusted capital.
The following debt ratings have been affirmed:
StanCorp Financial Group, Inc.—-- “bbb” on $250 million
5.00% senior unsecured notes, due 2022-- “bb+” on $300 million
6.90% junior subordinated debentures, due 2067 (currently $253
million outstanding)
The following shelf ratings have been affirmed:
StanCorp Financial Group, Inc.—-- “bbb” on senior
unsecured debt-- “bbb-” on subordinated debt-- “bb+” on preferred
stock
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. Best’s
Credit Rating Methodology can be found at
www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2014 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
A.M. BestMichael Adams, 908-439-2200, ext. 5133Senior Financial
Analystmichael.adams@ambest.comorChristopher Sharkey, 908-439-2200,
ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorAndrew Edelsberg,
908-439-2200, ext. 5182Vice
Presidentandrew.edelsberg@ambest.comorJim Peavy, 908-439-2200, ext.
5644Assistant Vice President, Public
Relationsjames.peavy@ambest.com
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