A.M. Best Upgrades Ratings of Security Benefit Life Insurance Company and Its Affiliate

August 2, 2011 by N/A

OLDWICK, N.J.–(BUSINESS WIRE)–A.M. Best Co. has upgraded the financial strength rating (FSR) to       B+ (Good) from B (Fair) and issuer credit ratings (ICR) to “bbb-” from       “bb” of Security Benefit Life Insurance Company (Topeka, KS) and       its affiliate, First Security Benefit Life and Annuity Company of New       York (Rye Brook, NY) (collectively known as Security Benefit Group).

In addition, A.M. Best has upgraded the debt ratings to “bb-” from “b+”       on the existing surplus notes issued by Security Benefit Life Insurance       Company. All ratings have been removed from under review with positive       implications and assigned a stable outlook. Both companies are       subsidiaries of Security Benefit Corporation, which will be controlled       by a new holding company led by Guggenheim Partners (Guggenheim). (See       below for a detailed listing of the debt ratings.) With the completion       of the acquisition transaction by Guggenheim on July 30, 2010, Security       Benefit Mutual Holding Corporation has been demutualized.

The rating actions reflect Security Benefit Group’s improved       risk-adjusted capitalization, which is supported by a large cash capital       infusion by Guggenheim, enhanced financial flexibility to support new       business growth opportunities and the potential improvement in the asset       allocation strategy given the benefits of Guggenheim’s investment       expertise. A.M. Best also notes that Security Benefit Group’s financial       leverage and exposure to a high level of intangible assets associated       with the past acquisition of the Rydex Holdings transaction will be       lowered as a result of the fresh capital contribution from Guggenheim.

Security Benefit Group’s relationship with Guggenheim, who has managed       the group’s investment portfolio since June 2009, provides it with       investment management expertise, better asset/liability management focus       and potential improvement to the group’s asset allocation strategy going       forward. Security Benefit Group’s GAAP and statutory operating income       have improved in recent periods due to improved investment results and       reduction of its operating expenses as well as an improvement in the       financial markets, which positively impacted guaranteed minimum death       benefit reserves and surrender activity.

Partially offsetting factors are the group’s reduced premiums,       particularly within its variable annuity lines of business, high asset       allocation to residential mortgage-backed securities, which are mostly       agency sponsored bonds, reduced but still a large unrealized loss       position in its general account portfolio tied to collateralized debt       obligations and other structured asset classes, and its large affiliated       investment in SGI-Rydex, which represents significant exposure relative       to its capital and surplus position. The group also will face challenges       as it attempts to rebuild marketing momentum in its core variable and       fixed annuity businesses, sold primarily to the 403(b) retirement       marketplace.

A.M. Best expects that the levels of risk-adjusted capitalization,       financial leverage ratios and operating results will continue to support       the current ratings. A.M. Best also expects that the level of intangible       assets at the holding company will be at a manageable level following       the completion of the restructuring.

The following debt ratings have been upgraded:

Security Benefit Life Insurance Company—

— to “bb-” from “b+” on $50 million 8.75% surplus notes, due 2016

— to “bb-” from “b+” on $100 million 7.45% surplus notes, due 2033

For Best’s Credit Ratings, an overview of the rating process and rating       methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including       any additional methodologies and factors that may have been considered,       can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit       rating organization dedicated to serving the financial and health care       service industries, including insurance companies, banks, hospitals and       health care system providers. For more information, visit www.ambest.com.

Originally Posted at BestWire on August 2, 2011 by N/A.