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TMCNet:  A.M. Best Revises Outlook to Positive for Starmount Life Insurance Company

[February 12, 2014]

A.M. Best Revises Outlook to Positive for Starmount Life Insurance Company

OLDWICK, N.J. --(Business Wire)--

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.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


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