The ratings of SBLI USA Mutual Life Insurance Company Inc or SBLI USA, New York, and S.USA Life Insurance Company Inc, Phoenix, its wholly-owned subsidiary are two companies that are collectively known as SBLI USA Group. A.M. Best Co. has declared the financial strength rating ‘B’ (fair) as well as issuer credit ratings of ‘bb.’
SBLI USA ratings have been revised and the ratings have gone from negative to stable. However, A.M. Best has subsequently withdrawn its ratings ever since the company requested that it no longer wanted to participate in the company’s interactive rating processes.
These ratings reflect the ongoing ‘realized capital losses’ of the SBLI USA Group, which has resulted primarily due to the significant investments in ‘real estate-related’ asset classes such as non-agency residential mortgage-backed securities, commercial mortgage-backed securities, real-estate partnerships, direct investments made in real estate, etc. Apart from this, the ratings also reflect the group’s fairly modest ‘risk-adjusted capital position’ after a huge decline in ‘absolute capital and surplus’ since the last few years. SBLI USA Group has a limited business profile and has not written new business ever since June 2010. This is also being reflected in the ratings.
After having revised the outlook from negative to stable, A.M. Best Co. has noted that there have been significant improvements in the operating earnings during 2011, due to the absence of the ‘statutory new business’ expenses. Added to this, SBLI USA Group also realized material increases (in statutory surplus) basically driven by the unrealized capital gains. These gains will partially offset the huge decline in the statutory surpluses during 2010. This had been triggered by the substantial ‘unrealized investment losses’ that resulted from market-to-market adjustments which precipitated due to the NAIC’s reclassification of some of the commercial mortgage-backed securities.
The process used to determine these ratings is the ‘Best Credit Rating Methodology’ that provides a detailed explanation of A.M. Best Company’s rating process. It contains different rating criteria that are used in the rating process. Some of the key criteria include – ‘Understanding BCAR for Life/Health Insurers,’ ‘Risk Management and the Rating Process for Insurance Companies,’ and ‘Rating Members of Insurance Groups.’ A.M. Best Company is one of the oldest insurance rating companies and the credit rating methodology can be found on the company’s website. The company was founded in 1899 and is considered to be one of the ‘most authoritative’ information sources.
