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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 27, 2011 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating of B++ (Good) and issuer credit rating of "bbb" of Sentinel Security Life Insurance Company(Sentinel Security Life) (Salt Lake City, UT) [OTCBB: SENI]. The outlook for both ratings is stable.
The affirmation of the ratings reflects Sentinel Security Life's solid risk-adjusted capitalization for its current levels of insurance and investment risk, despite continuing declines in capital and surplus triggered by investment losses, and more recently, an increase in non-admitted assets. The affirmation of the ratings also reflects Sentinel Security Life's profitable—although modest—net operating performance. The company's earnings are derived almost entirely from its core ordinary life segment, which has been enhanced by a controlled net premium growth strategy and a well-established personal producing agent distribution network that mainly markets the company's final expense life insurance products.
Partially offsetting these positive rating factors is Sentinel Security Life's historically narrow business profile. To address these concerns, the company has been expanding geographically, and in 2010 began distributing Medicare Supplement and Medicare Select plans. Sentinel Security Life focuses on the senior market with distribution through a brokerage distribution channel under a single supervising general agent agreement with one of the nation's largest marketing organizations and through an internal career agent sales force.
Additionally, later in 2011, Sentinel Security Life plans to begin distributing fixed annuity products to the senior market under the same supervising general agent. As a result, A.M. Best believes the company may be exposed to business concentration risk. A.M. Best also believes that despite the company's plans to implement controlled growth strategies and utilize reinsurance to mitigate statutory new business expense strain associated with its new product initiatives, it may still be challenged to sustain and improve its net operating performance and maintain its current level of risk-adjusted capitalization.
The company's balance sheet includes exposure to stocks—preferred and common—although there was a significant decrease in the exposure to stocks in 2010. The level of below investment grade bonds relative to total capital and surplus has increased. These securities can be influenced by the general conditions of the economy. If the U.S. economic recovery should stall or deteriorate, it could adversely affect Sentinel Security Life's operating performance and financial strength.
The principal methodology used in determining these ratings is Best's Credit Rating Methodology - Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Understanding BCAR for Life and Health Insurers" and "Risk Management and the Rating Process for Insurance Companies." Methodologies can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.