A.M. Best Co. Affirms Ratings of StanCorp Financial Group Inc.; Assigns Issuer Credit Rating.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and assigned an issuer credit rating (ICR) of "a+" to Standard Insurance Company (Standard Insurance) (Portland, OR) and The Standard Life Insurance Company of New York (White Plains, NY), both wholly-owned 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. All ratings have a stable outlook.

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

Historically, Standard Insurance has exhibited a disciplined approach to pricing, which has enabled it to report controlled growth and robust earnings. However, in the early part of 2005, Standard Insurance reported fairly considerable growth in new sales. Over the near term, A.M. Best will be monitoring its interest rate assumptions and new business growth strategy, as well as its ability to meet earnings projections provided to A.M. Best earlier this year.

While Standard Insurance has some diversification through its individual and retirement plans divisions, premium revenue and earnings are predominantly driven by its employee benefits segment. There remains a high level of competition in the employee benefits market. This competition, combined with the prolonged low interest rate environment, continues to be a challenge for companies operating in this market to grow their business, while at the same time achieving favorable, longer-term operating profitability.

In recent years, favorable operating results have permitted Standard Insurance to increase its level of dividends to its parent, which has provided ample coverage support for the debt service and stockholder dividends. A.M. Best anticipates financial leverage to remain under 25%.

A.M. Best has historically expressed concerns over Standard Insurance's significant exposure to investments in commercial mortgage loans. It is important to note, however, that Standard Insurance has historically reported very favorable results with very few delinquencies. Standard Insurance has established a niche in making smaller-sized loans, where there has been less competition. However, more lenders have begun to focus their attention on this segment of the market, which could reduce future spreads Standard Insurance can achieve or test its lending discipline. The long-tailed nature of this asset class matches well with the liabilities of Standard Insurance's core disability income products.

The following debt rating has been affirmed with a stable outlook:

StanCorp Financial Group Inc.--

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

The following indicative debt ratings have been affirmed with a stable outlook under the shelf registration:

StanCorp Financial Group Inc.--

-- "bbb+" on unsecured senior debt

-- "bbb" on subordinated debt 

-- "bbb-" on preferred stock 

For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.

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 http://www.ambest.com.