Fitch Affirms 'A-' Rating of StanCorp Financial; 'AA-' IFS Rtgs.Business Editors CHICAGO--(BUSINESS WIRE)--Dec. 16, 2003 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. affirms the 'A-' senior debt rating of StanCorp Financial Group ('StanCorp'), and the 'AA-' insurer financial strength ratings of Standard Insurance Company ('Standard') and its sister company, The Standard Life Insurance Company of New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of ('Standard NY'). The Rating Outlook for all ratings is Stable. The 'AA-' insurer financial strength rating of Standard Insurance Company reflects its good market position and solid operating performance in the group long-term disability ('LTD') and group life insurance market, its high quality investment portfolio, stable liability structure and good capital base. Offsetting these positives are the cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. earnings volatility inherent in the disability line of business; the lack of liquidity of its mortgage loans; and the relatively small but improving contribution of the two other business units, retirement plans and individual products. Excluding premiums from acquisitions in their first year, premiums have grown approximately 9%-12% in the last two years and are likely to grow in the 8%-9% range in 2003, although new premium generation is slowing due to price competition. The main drivers of premium growth and earnings continue to be the group disability and group life product lines, which were responsible for 53% and 37%, respectively, of premiums for nine months 2003. However, the retirement plan business has achieved profitability with slightly over $3 million or just under 2% of total 2003 nine month pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. . Standard's investment portfolio is of good quality and sufficient liquidity for the company's business needs given that the majority of its liabilities are not withdrawable. Bonds accounted for 66% of total invested assets at 9/30/03. The quality of the portfolio was very high, as below investment grade ('BIG') bonds accounted for only 3.3% of the portfolio and a very low 17.8% of adjusted surplus. Mortgage loans accounted for 33% of total invested assets at 9/30/03. Although this allocation is significantly higher than the industry norms given the company's liability structure, performance has been excellent. Standard did not foreclose fore·close v. fore·closed, fore·clos·ing, fore·clos·es v.tr. 1. a. To deprive (a mortgagor) of the right to redeem mortgaged property, as when payments have not been made. b. any mortgages in 2000-2002 and only one $.8 million mortgage in 2003. The net balance of restructured mortgages has decreased and there were no troubled mortgages at the end of the third quarter 2003. In August 2003, Standard Insurance Company issued $200 million of subordinated surplus notes to StanCorp in conjunction with an extraordinary $200 million dividend from Standard Insurance Company. While both transactions eliminate in consolidation, it had the affect of restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). Standard Insurance's capital by reducing the paid-in capital Paid-in capital Capital received from investors in exchange for stock, but not stock from capital generated from earnings or donated. This account includes capital stock and contributions of stockholders credited to accounts other than capital stock. that was recorded in connection with StanCorp's capital contribution to Standard Insurance in 2002, used to fund the acquisition of the Group Life and Group Disability businesses of Teacher's Insurance and Annuity Association ('TIAA'). StanCorp funded the acquisition through the issue of $250 million in senior notes in the public market. The surplus note provides a consistent source of cashflow to StanCorp that can fund interest payments on the public senior note issue. Fitch expects Standard's earnings performance should continue to improve because of good top line growth and solid management of business drivers including expenses, mortality/morbidity and persistency; Standard's investment portfolio will continue to achieve strong yields along with superior default experience on its mortgage loan portfolio; capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. will remain solid, with the risk-based capital ratio Risk-based capital ratio Bank requirement that there be a minimum ratio of estimated total capital to estimated risk-weighted asset. of Standard to remain near its current level of 300% of the company action level; consolidated debt-to-capital to remain below 25% at the current rating level. Fitch notes StanCorp has slowed its pace of share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. and increased its dividend payout pay·out n. 1. The act or an instance of paying out. 2. A percentage of corporate earnings that is paid as dividends to shareholders. in response to tax law changes. Entity/Issue/Type Action Rating/Outlook StanCorp Financial Group -- Senior debt rating Affirm To ratify, establish, or reassert. To make a solemn and formal declaration, as a substitute for an oath, that the statements contained in an Affidavit are true or that a witness will tell the truth. 'A-'/Stable; -- Long-term issuer rating 10 year 6.875% $250MM senior notes Affirm 'A-'/Stable; Standard Insurance Company -- Insurer financial strength rating Affirm 'AA-'/Stable. The Standard Life Insurance Company of New York -- Insurer financial strength rating Affirm 'AA-'/Stable. |
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