[February 07, 2013]

A.M. Best Revises Issuer Credit Rating Outlook to Negative for Standard Life & Casualty Insurance Company

A.M. Best Co. has revised the issuer credit rating (ICR) outlook to negative from stable and affirmed the financial strength rating (FSR) of B (Fair) and ICR of "bb+" of Standard Life & Casualty Insurance Company (Standard Life) (Salt Lake City, UT). The outlook for the FSR is stable.

The revised outlook for the ICR reflects Standard Life's fluctuation in its modest absolute capital and surplus levels, the challenges and uncertainties associated with changing its strategic direction and its increased financial leverage. In late 2011, Standard Life announced its exit from the individual major medical market, its largest line of business. This action was in response to the challenges in the competitive and regulatory environment resulting from health care reform legislation. As such, this may pose challenges and uncertainties in the company's strategic ability to replace the loss of revenue. Additionally, Standard Life has taken on significant leverage to acquire assets in late 2011 and 2012, which will require permanent financig. This will further inhibit any future investments as the company leverages its balance sheet with additional debt.

The ratings reflect Standard Life's improving capital levels and more favorable operating results in 2012. Additionally, the company has an established distribution network that includes solid relationships with independent marketing organizations and brokers, which contract with captive and semi-captive agents.

Standard Life's ICR outlook could return to stable if the company successfully executes its business strategy by generating manageable, sustainable premium revenue and favorable underwriting experience in some of its newer product lines, reduces its debt leverage and grows absolute and risk-adjusted capital. Alternatively, negative rating actions could occur if the company's earnings trend declines or it incurs a material depletion in its risk-adjusted capital and surplus, incurs additional debt leverage or impairs assets.

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.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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