S&P Affirms SAFECO Life Insurance & Units 'AA-' Rtgs.
(Standard & Poor's CreditWire)--Standard & Poor's today affirmed its double-'A'-minus counterparty credit and financial strength ratings on SAFECO Life Insurance Co., SAFECO National Life Insurance Co., and First SAFECO National Life Insurance Co. of New York. The outlook is stable.
In addition, Standard & Poor's affirmed its various ratings on SAFECO Corp. and SAFECO Intercompany pool members (see related press release).
The rating affirmation of SAFECO Life is based on its strategic position within SAFECO Corp.'s overall insurance operation, strong market positions primarily in its asset accumulation business segments, strong operating performance, and very strong liquidity. Offsetting these strengths are the group's good capitalization and high exposure to interest rate risk.
Major rating factors:
-- SAFECO Life benefits from its strategic position within SAFECO Corp.'s overall insurance operations through its continued managerial and financial expertise as well as marketing and administrative support functions.
-- SAFECO Life's business review is strong due to its established market positions in the structured settlement, bank-distributed annuity, qualified retirement market, and excess loss medical insurance segments.
-- SAFECO Life's operating performance is strong as measured by its GAAP earnings adequacy ratio of 192% at Dec. 31, 1998. Although overall profitability was impacted during 1998 because of losses incurred on its equity-indexed annuity product, the company's pre-tax GAAP earnings increased 23% for the period ending March 31, 1999, as compared to 1998 due to increased fee revenues and lower expenses.
-- SAFECO Life maintains a good risk-adjusted position as measured by Standard & Poor's capital adequacy ratio of 112% at Dec. 31, 1998, and evaluation of the company's risk management capabilities. Capitalization declined during 1998 because of the $78 million in dividends paid to SAFECO Corp.
-- Standard & Poor's believes the credit quality of SAFECO Life's investment portfolio is very strong, evidenced by its holdings of 97% investment-grade, fixed-income securities. The company's fixed-income portfolio, which accounts for approximately 90% of invested assets, consists primarily of corporate bonds and mortgage backed-securities (MBS). Although of high credit quality, MBS and company's interest-sensitive liability structure contain a level of interest rate risk, specifically in a volatile interest rate environment.
Standard & Poor's believes SAFECO Life will be able to sustain its GAAP earnings adequacy ratio in the 190% to 200% range due to good spread and expense control management. Growth in life insurance sales is expected to continue due in part to the company's increased multiline agent productivity. Capitalization is expected to remain within the good range, Standard & Poor's said.
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|Date:||Jun 11, 1999|
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