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The rating actions reflect the continuation of SFG’s favorable sales trends, positive net flows and overall strong operating performance. In addition, the solid investment returns generated from a higher allocation of structured fixed-income securities has enabled the group to maintain healthy interest spreads. The ratings also recognize SFG’s sound capitalization and targeted distribution strategy, which has facilitated organic growth. In 2011, SFG established a new business line, Sammons Retirement Solutions, which will look to distribute retirement-oriented products such as mutual funds and variable annuities through broker-dealers and their financial advisors. SFG’s ratings reflect its strong business profile as a leading producer of fixed-indexed annuities (FIA), its effective FIA hedging program and the benefits of SEI’s unique ownership structure through an
Partially offsetting these positive rating factors are the challenges SFG faces in further diversifying its operating profile in the competitive U.S. life insurance market and managing its interest-sensitive liabilities through the ongoing low interest rate environment. SFG continues to work on expanding its distribution platform and further product refinements to provide more balance in its results. Additionally, there is the potential for impairments given moderately higher allocations to riskier assets. The investment portfolio is weighted towards structured investments and a growing percentage of private placements, which increase risk and negatively impact liquidity. However, through the active management of portfolio manager
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. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Life/Health Insurers”; “A.M. Best’s Liquidity Model for U.S. Life Insurers”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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