A.M. Best Upgrades Ratings of Delphi Financial Group, Inc. and Its Subsidiaries

Business Wire


A.M. Best Co. has upgraded the financial strength ratings to A+ (Superior) from A (Excellent) and the issuer credit ratings (ICR) to “aa-” from “a+” of the life/health subsidiaries, Reliance Standard Life Insurance Company (Reliance Standard) (Chicago, IL) and First Reliance Standard Life Insurance Company (New York, NY), as well as the property/casualty subsidiaries, Safety National Casualty Corporation (St. Louis, MO) and its reinsured affiliate, Safety First Insurance Company (Chicago, IL) (together referred to as Safety National) of Delphi Financial Group, Inc. (DFG).

Additionally, A.M. Best has upgraded the ICR to “a-” from “bbb+” and all existing debt ratings of DFG. The outlook for all ratings is stable. (Please see below for a detailed list of the debt ratings.). DFG is a direct subsidiary of Tokio Marine & Nichido Fire Insurance Co., Ltd., whose ultimate parent is Tokio Marine Holdings, Inc. (Tokio Marine), Japan’s largest non-life insurance organization.

The rating upgrades for Reliance Standard reflect its continuing operating profitability and good capitalization, as well as the capital support agreement provided by Tokio Marine, to be used as needed. In the first half of 2013, Reliance Standard reported favorable operating results, which reflected its good overall group employee benefits loss ratio and was supported by the strong net flows in assets under management within the company’s asset management segment. Reliance Standard reported a combined ratio of 99.0%, which was slightly worse than its expectations, driven by an uptick in its group benefits loss ratio. Claims volatility was attributed to higher than average claim size reported in the long-term disability line of business and several larger claims reported in the group life insurance block. Reliance Standard remains committed to retaining its profitable blocks of business, and it continues to implement and maintain appropriate price increases on business, as needed. Overall persistency that was reported was in line with the company’s expectations as of June 30, 2013. Reliance Standard did report increased sales competition in the first half of 2013, as did many of its peer companies; however, favorable sales results were reported from the company’s voluntary product suite.

The rating actions recognize Safety National’s strong operating performance, sound risk-adjusted capitalization achieved in part through the implicit and explicit support from DFG and Tokio Marine, as well as its established market presence within the excess workers’ compensation market.

Partially offsetting these positive rating factors are Safety National’s areas of ongoing adverse loss release development occurring in accident years 2007 and prior, as well as investment market fluctuations, which have hampered the company’s ability to organically generate capital. Despite these concerns, the outlook recognizes the group’s historically solid profitability levels, which outperformed its peers’ composites, and A.M. Best’s expectations that Safety National should generate surplus growth through strong earnings over the near term.

The positive rating attributes acknowledge Safety National’s disciplined underwriting standards, service-oriented business approach and experienced management team. Furthermore, DFG and Tokio Marine are fully committed to supporting Safety National’s operations.

As a more recent member of Tokio Marine, DFG has potential to benefit from the strength of its parent through the receipt of capital support, if needed. Currently, the organization maintains an appropriate debt-to-capital ratio at approximately 22% (including some equity credit for hybrid securities) and a good interest coverage ratio at about nine times.

A.M. Best views DFG and its subsidiaries well positioned for the near to medium term. Factors that could lead to negative rating actions include a material decline in the group’s stand-alone operating profitability, increased investment risk and/or realized losses beyond A.M. Best’s expectations (which would reduce risk-adjusted capital levels) or a change in A.M. Best’s view of the strategic importance of DFG and its subsidiaries to Tokio Marine.

The following debt ratings have been upgraded:

Delphi Financial Group, Inc.—

-- to “a-” from “bbb+” on $250 million 7.875 % senior unsecured notes, due 2020

-- to “bbb” from “bbb-” on $175 million fixed/floating rate junior subordinated debentures, due 2037

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

A.M. Best Co.
Kate Steffanelli—L/H
Senior Financial Analyst
(908) 439-2200, ext. 5063
Brian O’Larte—P/C
Senior Financial Analyst
(908) 439-2200, ext. 5138
Rachelle Morrow
Senior Manager, Public Relations
(908) 439-2200, ext. 5378
Jim Peavy
Assistant Vice President Public Relations
(908) 439-2200, ext. 5644


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