A.M. Best Co. has revised the outlook to positive from stable and
affirmed the financial strength rating of B++ (Good) and issuer credit
rating of "bbb+" of Starmount Life Insurance Company (Starmount)
(Baton Rouge, LA).
The revised outlook reflects Starmount's favorable long-term operating
trends, conservative investment philosophy and sound risk-adjusted
capitalization. Starmount has reported consistently profitable results
in its core group dental and vision lines of business, driven by the
increasing amount of covered lives and favorable loss ratios.
Facilitated by its disciplined underwriting and prudent expense
management, the company has been able to competitively price its group
dental and vision products, allowing its premium revenue to grow
steadily while generating strong margins. While operating results in its
individual business had been more volatile, Starmount was effective in
reassessing its strategy in that segment and returned it to modest
profitability in 2013. Starmount continues to refine its individual
business distribution and marketing strategy and anticipates increasing
profits associated with its individual lines going forward.
Starmount's operating profitability has been bolstered by a steady
stream of net investment income derived from its conservative investment
allocation. The majority of the company's assets are allocated to
investment grade corporate and municipal bonds, with the remainder in
cash or short-term holdings. The allocation is appropriate for
Starmount's shorter-tail liability profile, and the company has not
reported any material impairments over the last five years.
Additionally, Starmount's more than adequate level of risk-adjusted
capital has increased consistently, driven by favorable operating
performance, and has not been impacted by the modest dividends paid to
its holding company.
While the revised outlook reflects Starmount's favorable overall
operating trends, A.M. Best remains somewhat concerned regarding
geographic concentration risk as a majority of Starmount's direct
business is written in Louisiana, Mississippi and Texas. However, some
progress in geographic expansion has occurred over the past few years.
Additionally, A.M. Best acknowledges that a material amount of business
is written through a relationship with one reinsurance partner, but
notes that the impact of this issue continues to decline. A.M. Best will
continue to closely monitor the terms of this relationship and its
impact on Starmount's profitability going forward.
Factors that could result in favorable rating actions for Starmount
include increased diversification of net premiums, a greater proportion
of sales on Starmount paper and positive operating earnings within its
individual business segment. Factors that could lead to negative rating
actions include a deterioration in the company's operating performance
and/or diminished risk-adjusted capitalization levels.
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.
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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