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A.M. Best Affirms Ratings of StanCorp Financial Group, Inc.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and the issuer credit ratings (ICR) of "a+" of Standard Insurance Company (Standard Insurance) (Portland, OR) and The Standard Life Insurance Company of New York (White Plains, NY), both wholly-owned insurance subsidiaries of StanCorp Financial Group, Inc. (StanCorp) (NYSE: SFG) (Portland, OR). Concurrently, A.M. Best has affirmed the debt rating of "bbb+" of StanCorp's existing unsecured senior notes. The outlook for all ratings is stable. (See below for a detailed list of the ratings.)

Standard Insurance's rating affirmations reflect its well-established niche in the employee benefits market, continued positive earnings and its favorable risk-adjusted capitalization at the operating subsidiaries and its conservative level of financial leverage.

Standard Insurance has continued to generate increasingly positive earnings over the last six years, and while the company has some diversification through its individual and retirement plans businesses, premium revenue and earnings are predominately driven by its employee benefits business. Although recent revenue growth has increased year over year, new sales premiums in its core employee benefit lines have slowed somewhat due to a competitive marketplace. Additionally, Standard Insurance continues to exercise a disciplined pricing strategy, which favors profitability over top-line growth, and thus, has also contributed to a decrease in new sales. Although first quarter 2006 earnings results were negatively impacted by higher than expected claims expenses in Standard Insurance's group life, group disability and individual disability insurance business; A.M. Best remains confident that Standard Insurance's full year claims expenses will be in line with its stated projections. However, A.M. Best anticipates Standard Insurance will continue to be challenged for new business growth in the near future.

StanCorp's insurance subsidiaries are favorably capitalized and have provided dividend support to service outstanding debt and pay stockholder dividends. A.M. Best anticipates StanCorp's financial leverage to remain under 25% and its coverage ratio will remain ample.

A.M. Best notes Standard Insurance's significant exposure to investments in its commercial mortgage loans and its geographic concentration in California. Standard Insurance has historically reported very favorable results with very few delinquencies, and it maintains a niche in making smaller-sized loans, where traditionally, there has been less competition. However, A.M. Best has observed that more lenders are focusing on this segment of the market, which is making for a more competitive environment.

The following debt rating has been affirmed:

StanCorp Financial Group, Inc.--

--"bbb+" on $250 million 6.875% unsecured senior notes, due 2012

The following indicative debt ratings have been affirmed under the shelf registration:

StanCorp Financial Group, Inc.--

--"bbb+" on senior unsecured debt

--"bbb" on subordinated debt

--"bbb-" on preferred stock

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at
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Publication:Business Wire
Geographic Code:1USA
Date:Jul 5, 2006
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