AMERICAN SKANDIA LIFE ASSURANCE CORPORATION CLAIMS PAYING ABILITY RATING DOWNGRADED TO 'AA'
CHICAGO, April 23 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has downgraded the claims paying ability rating of American Skandia Life Assurance Corporation (American Skandia) from `AA' (Double-A) to `AA-' (Double-A-Minus). The rating action reflects the company's increased earnings volatility as a result of expense overruns and lower than expected premium production. American Skandia is a young company in the early stages of its growth plan. Positively, the company has a low risk liability structure, an adequate capital position, excellent asset quality, and the support of its ultimate parent, Skandia Group (Skandia). American Skandia's fixed and variable annuities are held in separate accounts which, under Connecticut law, provide special protection for the separate account assets, for the benefit of annuity owners. American Skandia is a stock life insurer based in Shelton, Connecticut with total admitted assets of $514 million and adjusted surplus of $37 million at December 31, 1992. The parent placed $38 million of capital into American Skandia in 1992 to fund a long-term growth program. American Skandia was established by Skandia in 1988 as its entry in the U.S. annuity market. Skandia is a Stockholm-based international insurance and financial services corporation with its home market in the Nordic countries. The parent has recently experienced poor financial results in the reinsurance and credit insurance businesses and investment losses due to the real estate recession. In 1992, American Skandia's sales production of $288 million was lower than expected primarily as a result of rating implications from parent company weakness. American Skandia's ability to grow production while controlling operating expenses will be a key determinant of success in future years. In 1992, total operating expenses were $15 million, $2 million higher than planned due in part to establishing proprietary distribution and updating core processing systems. These expense overruns, coupled with lower than expected production, resulting in a net operating loss of $9 million in 1992 versus a planned loss of $4 million. American Skandia expects to break-even in 1993. First quarter results are promising, with sales already in excess of 50 percent of 1992 total sales. First quarter expenses were also within plan. The company has experienced statutory losses since inception due to statutory accounting standards which require companies to recognize all acquisition costs (including commissions) in the year which the policy is written. American Skandia does not use surplus relief transactions to levelize profitability. -0- 4/23/93 /CONTACT: Julie A. Burke, CPA, 312-368-3158, of Duff & Phelps Credit Rating Co./
CO: American Skandia Life Assurance Corporation ST: Connecticut IN: INS SU: RTG
LR -- NY046 -- 0045 04/23/93 12:15 EDT
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|Date:||Apr 23, 1993|
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