Rating Action on Delphi - Analyst Blog

Yesterday, Delphi Financial Group Inc., (DFG) and its primary life and health insurance units, Reliance Standard Life Insurance Co. and First Reliance Standard Life Insurance Co. both received an affirmation of “A” for financial strength rating (FSR) and “a” for issuer credit ratings (ICR) from the rating agency A.M. Best.

It also affirmed all debt ratings of Delphi Financial and Reliance Standard Life Global Funding. The outlook on all ratings has been upgraded to stable from last year's negative.

The positive outlook revision for Delphi's life and health subsidiaries emanates from the evident recovery in the investment portfolio of these units. Improved capital level as a result of capital infusions by the parent, which stands above the minimum required limits is another positive factor. The rating agency also acknowledges the units' favorable operating performance and underwriting discipline in the midst of a weak pricing environment and competitive market conditions.

However, A.M. Best is concerned about Reliance Standard's investment portfolio, which has a high concentration of structured securities and below investment grade bonds relative to its peers. The rating agency also feels that the continuing low interest rate environment might drag the earnings of the units going forward. 

A.M. Best has also affirmed the stable outlook, the FSR of A and ICR of “a on Safety National Group, a property and casualty unit of Delphi. The rating agency acknowledges the company's favorable operating performance, its niche in excess workers' compensation market and more than adequate capitalization.

Safety National has more than the required capital cushion given the capital support from its parent and the expected strong earnings growth over the near term. Negatives include unfavorable reserve development and volatile investment returns, which constrict internal capital growth.