A.M. Best Revises Issuer Credit Rating Outlook to Stable for SPJST
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The revision of the ICR outlook to stable reflects the challenges in sustaining the Society's previously positive trends in premiums, earnings and risk-adjusted capitalization. Ordinary life premiums, which increased in 2014, declined in 2015, reflecting a decrease in first-year life premium. Increased death claims and annuity benefit expenses resulted in a decline in operating earnings in 2015 and an operating loss through first-quarter 2016. Additionally, earnings spreads on the fixed annuity policies continue to experience modest contraction in the low interest rate environment. Finally, risk-adjusted capitalization had been improving in recent years through growth in unassigned funds and the reduction of higher risk equities and mortgage loans; however, increased allocations to lower-rated investment grade and below investment grade bonds caused a decline in risk-adjusted capitalization in 2015.
The affirmation of SPJST's ratings reflects the Society's relatively narrow business profile and high concentration of risk, mixed statutory operating results in recent years, increased risk in the fixed income portfolio and challenges to grow life premiums. Partially offsetting these negative factors are the Society's strategic efforts to improve the business mix and risk profile, its adequate risk-adjusted capitalization and generally positive recent earnings history. This press release relates to rating(s) that have been published on
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