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S&P Affirms Security Benefit Life 'AA-/A-1+' Ratings.

Business Editors

NEW YORK--(BUSINESS WIRE)--Standard & Poor's

Jan. 13, 2003-- Standard & Poor's Ratings Services said today that it affirmed its 'AA-/A-1+' counterparty credit and financial strength ratings on Security Benefit Life Insurance Co. and its 'AA-' counterparty credit and financial strength ratings on First Security Benefit Life Insurance and Annuity Co. of New York because of the companies' (collectively referred to as SBL) very strong position in the 403(b) retirement plan market (tax-sheltered annuities and mutual funds), very strong consolidated earnings adequacy and liquidity, and extremely strong capitalization. Partially offsetting these strengths are the challenges the companies face in sustaining sales and assets under management growth and earnings consistent with the ratings given the competitive pressures in the asset-accumulation markets and the challenging equity markets.

Standard & Poor's also said that it revised its outlook on SBL to negative from stable because of the risk that the expected earnings improvement could be delayed because of the potential drag from continuing equity market volatility, credit impairments, and interest rate volatility.

SBL's consolidated earnings in 2002, as measured by pretax GAAP ROA, are expected to be about 45 basis points (bps), which is somewhat below expectations for the current ratings. As long as the equity markets return to normal volatility levels, Standard & Poor's expects that within a year or two, SBL's pretax GAAP ROA will return to levels expected for the rating--about 65 bps-75 bps--because of the strength of its 403(b) franchise.

SBL has a very strong business profile because of its well-established position in the tax-sheltered annuity market, specifically in the K-12 portion of the retail 403(b) market segment. The insurer holds a top-five market share position in the K-12 public school market segment. As a result of its large percentage of qualified variable annuity business, long-standing distribution relationships, and target market, the SBL companies are less sensitive to interest rate risk than other annuity companies. SBL's solid business position is sustainable because of management's effective strategies and because the high barriers of entering the 403(b) market somewhat restrict increased competition.

Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.

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Publication:Business Wire
Date:Jan 13, 2003
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