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Rating agency reviewing Beneficial Financial's 'A'

Action blamed largely on exposure to risky loans

Beneficial Financial Group's financial-strength rating of "A" has been placed under review "with negative implications" by A.M. Best Co., the rating agency said Wednesday.

The action is due in large part to the Salt Lake-based company's "above-average" exposure to mortgage-backed securities, particularly subprime and Alt-A mortgages, according to an A.M. Best news release.

A.M. Best analyst Rosemarie Mirabella declined to disclose precisely how much Beneficial has invested in the risky mortgages but said the number is higher than for other financial and health-care service companies rated by the agency.

"Beneficial does have, in our opinion, high exposure relative to other life and health writers," Mirabella said Wednesday.

A recent A.M. Best survey found that similar companies have roughly 2 percent of their invested assets in subprime mortgages, she said.

Beneficial's exposure, however, exceeds three times its statutory capital and surplus. The current circumstance will require a "material capital contribution" from Beneficial's parent company, Deseret Management Corp., in the near future, according to the rating agency.

Mirabella declined to disclose the amount of the needed capital infusion.

Deseret Management Corp., the holding company for businesses affiliated with The Church of Jesus Christ of Latter-day Saints., is also the parent company of the Deseret Morning News.

A spokesman for Beneficial did not respond to requests for comment Wednesday on the rating review.

Mirabella said the review is meant to be a short-term process.

"It basically means that the company in this case is experiencing some negative results, and we need additional time to assess the impact on their rating," she said.

The rating agency has outlined for Beneficial steps it must take to avoid a reduction in its current A rating.

"We're going to be looking at their results over the next couple of months," she said. "We'll be staying abreast on the whole subprime issue."

Beneficial Life was founded in 1905 and changed its name to Beneficial Financial Group in 2004. A.M. Best has been rating the Salt Lake-based company since at least 1956, Mirabella said Wednesday.

She was not aware of another time when Beneficial's financial-strength rating was under review.

"While (Beneficial's) overall risk concentration within subprime may have turned out to be in hindsight not a good thing, it is a well-run company with very strong operational fundamentals outside of this particular issue," Mirabella said.

According to Beneficial's Web site, the company was included in Ward Group's top 50 performing insurance companies in 2006 and has received an "A+" rating from Standard and Poor's.