Oldwick, NJ -(BusinessWire)- A.M. Best has affirmed the financial strength rating of A+ (Superior) and the issuer credit ratings (ICR) of “aa-” of the life/health subsidiaries, Reliance Standard Life Insurance Company (Chicago, IL) and First Reliance Standard Life Insurance Company (New York, NY) (together referred to as Reliance Standard), as well as the property/casualty subsidiaries, Safety National Casualty Corporation (St. Louis, MO) and its reinsured affiliate, Safety First Insurance Company (Chicago, IL) (together referred to as Safety National) of Delphi Financial Group, Inc. (DFG). DFG is a direct subsidiary of Tokio Marine & Nichido Fire Insurance Co., Ltd., whose ultimate parent is Tokio Marine Holdings, Inc. (Tokio Marine), Japan’s largest non-life insurance organization.
Concurrently, A.M. Best has affirmed the ICR of “a-” and existing issue ratings of DFG. The outlook for all the above ratings is stable. (Please see below for a detailed list of the issue ratings.)
The ratings of Reliance Standard reflect the combined strength and support of its ultimate parent, Tokio Marine, as well its established presence within the small to mid-size employee benefits marketplace and the group’s adequate risk-adjusted capital position, despite increasing risk within its general account investment portfolio. The ratings also consider Reliance Standard’s improved risk- management capabilities, its disciplined pricing philosophy and the reasonable level of financial leverage and strong interest coverage ratios at Reliance Standard’s intermediate holding company, DFG. A.M. Best notes that Reliance Standard’s entrance into the stop loss insurance line of business has added to the company’s diverse portfolio of employee benefits and annuity products.
Partially offsetting these positive factors is the considerable increase in below investment grade bonds in Reliance Standard’s general account investment portfolio, which currently represents approximately 125% of capital and surplus. In addition, operating leverage has increased considerably to approximately 25% as of the second quarter of 2015, primarily due to an increase in notes issued from its funding agreement-backed security program. However, Reliance Standard’s operating leverage remains within A.M. Best’s guidelines. Also, partially mitigating these concerns is that the company maintains a tight match on the duration of its assets and liabilities.
Reliance Standard has also experienced a decline in sales in its core group and disability insurance business in recent periods due both to the challenging economic and the competitive market environment. This has resulted in a shift in the mix of business towards more interest sensitive annuities, which A.M. Best views as a less creditworthy product line. However, A.M. Best notes that the life/health group has been successful in maintaining healthy interest spreads in the challenging low rate environment.
Safety National’s ratings reflect its historically profitable operating performance, solid and improving risk-adjusted capitalization due in part to support from its intermediate and ultimate parents and its established market presence within the excess workers’ compensation market.
Partially offsetting these positive rating factors is ongoing adverse loss reserve development, investment market fluctuations that hampered the group’s ability to organically generate capital in prior years and significant premium growth over the current five-year period. Despite these concerns, the outlook recognizes the group’s consistently strong earnings, which outperform its peer composite average, and A.M. Best’s expectation that Safety National should generate surplus growth through strong earnings over the near term.
The positive rating attributes reflect the group’s disciplined underwriting standards, service-oriented business approach and experienced management team. Furthermore, Delphi and Tokio Marine are fully committed to supporting Safety National’s operations.
The following issue ratings have been affirmed:
Delphi Financial Group, Inc.—
- “a-” on $250 million 7.875 % senior unsecured notes, due 2020
- “bbb” on $175 million fixed/floating rate junior subordinated debentures, due 2037
Reliance Standard Life Global Funding II— “aa-” program rating
- “aa-” on all outstanding notes issued under the program