A.M. Best Affirms Ratings of Security Benefit Life Insurance Company and Its Affiliate [Manufacturing Close – Up]

A.M. Best Co. has affirmed the financial strength rating of B++(Good) and issuer credit ratings of "bbb+" of Security Benefit Life Insurance Company (Topeka, KS) and its affiliate, First Security Benefit Life Insurance and Annuity Company of New York (Rye Brook, NY) (collectively known as Security Benefit Life).

Both companies are the subsidiaries of Security Benefit Corp., which is controlled by Guggenheim SBC Holdings. In addition, A.M. Best has upgraded the debt ratings of the existing surplus notes issued by Security Benefit Life Insurance Company. The outlook for all ratings is stable. (See below for a detailed listing of the debt ratings.)

The rating actions reflect Security Benefit Life's positive earnings trends, favorable risk-adjusted capitalization, new premium growth as a result of its enhanced business profile and distribution network, as well as the benefits of the investment expertise of Guggenheim Investment, its large investment manager. In addition, the ratings acknowledge the organization's continuing focus on providing a full range of retirement savings and income solutions to its diversified group of clients, seeking pre- and post-retirement benefits for its diverse group of policyholders.

Security Benefit Life has benefitted from the corporate, financial and investment management expertise provided to it by Guggenheim Partners. Guggenheim Partners also has assumed the responsibility of managing Security Benefit Life's investment portfolio since 2009, which has resulted in improved overall credit quality and investment performance. Security Benefit Life has recorded positive statutory and GAAP earnings in recent years due to increased life and annuity sales, lower costs and improved spread management, which is partially offset by new business strain from strong sales of its fixed-indexed annuities. The overall effects of capital contributions and positive earnings trends have resulted in Security Benefit Life's risk-adjusted capitalization being more than sufficient for its ratings. Financial leverage and interest coverage ratios also are within the guidelines for its ratings. Historically, Security Benefit Life has focused its marketing efforts in the education retirement marketplace; however, in recent years, it has expanded its product profile by selling fixed indexed annuities and multi-year guaranteed annuities while concurrently building up a diversified distribution network.

The challenges facing Security Benefit Life include maintaining sufficient risk-adjusted capitalization to support its rapid growth of fixed indexed annuity sales, managing increased holdings in potentially riskier asset classes, such as structured securities and other invested assets and holding general account reserves that are comprised almost entirely of interest-sensitive products, which could impact spreads if interest rates change, although the organization does monitor closely the duration of its assets and liabilities. A.M. Best notes that Security Benefit Life maintains a strong fee-based business from its separate account education retirement business.

Factors that could lead to positive rating actions include a stable risk-adjusted capitalization that is commensurate with higher expected growth, greater diversification in product mix and a consistent earnings trend. Factors that could lead to negative rating actions are Security Benefit Life having an increase in its exposure to higher risk assets to support spread margin, a decrease in its risk-adjusted capitalization due to operating results and unfavorable investment performance, as well as continued accelerated growth in its fixed-indexed annuity liabilities.

The following debt ratings have been upgraded:

Security Benefit Life Insurance Company-

-- to "bbb-" from "bb+" on $50 million 8.75 percent surplus notes, due 2016

-- to "bbb-" from "bb+" on $100 million 7.45 percent surplus notes, due 2033

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides an explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process.

A.M. Best Company is an insurance rating and information source.

More Information:

http://www.ambest.com

Best's Credit Rating Methodology:

http://www.ambest.com/ratings/methodology

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