NU Online News Service, Nov. 24, 2004, 4:30 p.m. EST

A rating agency has downgraded 4 life insurance units of a Lincoln, Neb., insurance group.[@@]

Standard & Poor’s Ratings Service, New York, says it has lowered its financial strength ratings on 4 life insurance units of AmeritasAcacia Companies to AA minus, from AA, because managers of the companies have been taking too conservative of an approach to using their capital.

The companies affected are Ameritas Life Insurance Corp., First Ameritas Life Insurance Corp. of New York, Ameritas Variable Life Insurance Company and Acacia Life Insurance Company.

The companies have suffered from soft life and annuity sales in recent years because they have focused so much on minimizing risk, S&P analysts write in a comment about the rating change.

The companies’ competitive position has been deteriorating, with first-year sales falling over the past 3 years, and the company needs to reinvigorate sales to stem the decline at its flagship life and annuity operations, the analysts write.

AmeritasAcacia managers have stayed away from some product features that are popular with customers and distributors, the S&P analysts write.

But the insurance units’ ratings are still high because of “the group’s extremely strong capitalization, very strong diversified earnings,” top 5 ranking in small group dental and top 25 ranking in life and annuity sales, the analysts write.

The analysts say AmeritasAcacia has seen its dental and eyecare business grow 7% and its mutual fund sales grow 14%.

The group’s capital adequacy ratio probably “will be maintained at significantly more than 500%,” the S&P analysts predict.