A.M. Best Affirms Ratings of Delphi Financial Group, Inc. and Its Life Subsidiaries; Maintains Negative Outlook

A.M. Best Co. has affirmed the issuer credit rating (ICR) of “bbb” of Delphi Financial Group, Inc. (Delphi Financial) (Wilmington, DE) [NYSE:DFG]. A.M. Best also has affirmed the financial strength rating (FSR) of A (Excellent) and ICRs of “a” of Delphi Financial’s primary life insurance subsidiaries, Reliance Standard Life Insurance Company (Reliance Standard) (Chicago, IL) and First Reliance Standard Life Insurance Company (New York, NY). Concurrently, A.M. Best has affirmed all debt ratings of Delphi Financial and Reliance Standard Life Global Funding (Illinois). The outlook of all ratings remains negative. (See below for a detailed listing of the companies and ratings.)

A.M. Best continues to maintain a negative outlook on Delphi Financial and its life insurance subsidiaries due to their above average level of investment risk and subpar investment performance. Delphi’s investment philosophy has historically been more aggressive than many of its peer companies.

Reliance Standard currently holds a sizeable portion of its invested assets in structured securities, including non-agency residential mortgage-backed securities, which have experienced considerable rating downgrades over the past twelve months. Additionally, through the first nine months of 2009, Reliance Standard reported large realized capital losses tied to the company’s fixed income portfolio. However, A.M. Best notes, like the rest of the life/health industry, its unrealized loss position has significantly improved since March 31, 2009.

Reliance Standard continues to report consistent operating results and has an established presence in the small to mid-sized employee benefit market, where it focuses primarily on group disability income and group life product offerings. The company has reported moderate premium growth and favorable persistency in its book of business, despite the weak economy. Thus far, there has been no evidence of an economic impact regarding claims incidence reported, and loss ratios remain stable. However, aggressive pricing continues to be observed within the employee benefits market, which has potential to further pressure the company’s sales going forward. Reliance Standard gains additional diversification through its growing asset accumulation business as well as its portfolio of voluntary offerings and its limited benefit medical offering.

Delphi Financial continues to maintain an appropriate level of capital to support its current insurance risk. Debt-to-capital position remains at an acceptable level at 23.5% as of September 30, 2009. Delphi Financial raised capital earlier this year through two separate common equity offerings totaling $121 million and several capital contributions to Reliance Standard to bolster its capital position, which more than offset the large amount of realized capital losses. A.M. Best also expects that the forthcoming NAIC/ PIMCO ratings “remigration” of the company’s non-agency residential mortgage-backed securities will also add positively to its year-end risk-adjusted capital position.

The ICR of “bbb” has been affirmed for Delphi Financial Group, Inc.

The following debt ratings have been affirmed with a negative outlook:

Delphi Financial Group, Inc.—

-- “bbb” on $143.8 million 8% senior unsecured notes, due 2033

-- “bb+” on $175.0 million 7.376% fixed/floating rate junior subordinated debentures, due 2037

Reliance Standard Life Global Funding—“a” program rating

-- “a” on $65 million 5.625% medium-term notes (MTNs), due 2011

The following indicative ratings have been affirmed with a negative outlook for debt securities available under the shelf registration:

Delphi Financial Group, Inc.—

-- “bbb” on senior unsecured debt

-- “bbb-” on subordinated debt

-- “bb+” on preferred stock

Delphi Finance Trust I –

--“bb+” on preferred securities

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

Delphi A (NYSE:DFG)
Historical Stock Chart
From May 2024 to Jun 2024