Fitch Affirms Wilton Re’s IFS Rating At ‘A’
Fitch Ratings has affirmed at ‘A’ the Insurer Financial Strength [IFS] ratings of Wilton Reassurance Company, Wilton Reinsurance Bermuda Limited, Wilton Reassurance Life Company of New York and Texas Life Insurance Company [collectively referred to as Wilton Re].
At the same time, Fitch has affirmed Wilton Re Holdings Limited’s long-term Issuer Default Rating [IDR] at ‘BBB+’. The Rating Outlook is Stable.
The ratings agency said, “The ratings are based on Wilton Re’s consistently strong insurance earnings, balance sheet strength that includes solid capitalization across the operating subsidiaries, a conservative investment portfolio, ample liquidity and a reasonable amount of financial leverage. Additionally, Wilton Re is led by a team with extensive industry experience, which has helped allay Fitch’s concerns about the company’s relatively short operating history.
“Fitch believes Wilton Re has taken a disciplined approach to growth reflective of the experience of the management team and the expectations of the company’s investors. Fitch believes Wilton Re has prudently deployed capital only on transactions that have consistently met or exceeded its profitability hurdles. As a result, the company’s operating performance to date has compared favorably to peers.
“Also factored into the rationale is Wilton Re’s strategic focus on U.S. life insurance where mortality risk and lapse risk are generally well understood and less correlated to financial market performance compared to annuity products. Wilton Re does not have exposure to variable annuities and more risky insurance products such as those with enhanced guarantees.
“Fitch believes capitalization is strong across Wilton Re’s operating subsidiaries. The company maintains risk-based capital levels in excess of Fitch’s guidelines for the current rating category for U.S. operations. At Sept. 30, 2013 the RBC ratio of the U.S. subsidiaries was estimated at 465%.
“The company has approximately 35% of its business in Wilton Reinsurance Bermuda Limited. Accounting rules in Bermuda are less conservative than U.S. statutory accounting. Given these differences, Fitch looks at consolidated GAAP operating leverage to judge capital adequacy across the organization. Wilton Re’s ratio was 5.6x at Sept. 30, 2013, a very strong result. Fitch views the company’s financial leverage of approximately 17% as appropriate for the rating category.
“Fitch views Wilton Re’s investment portfolio as conservative and investment losses since the financial crisis have been minimal. Fixed-income securities comprised 94% of Wilton Re’s invested assets at Sept. 30, 2013. The bond portfolio is high quality and liquid with 8% below investment-grade (BIG) securities.
“Fitch also believes that Wilton Re’s liquidity position is sound. The company currently has cash and liquid assets to meet obligations at the holding company and operating company levels. Additional sources of liquidity include a senior revolving credit facility and as a member of the FHLB of Des Moines Wilton Re has access to additional borrowing capacity.
“Offsetting these positives are execution risk associated with pricing and integrating acquired blocks of business particularly as the size of the transactions increases; concentration risk since a few large deals can drive overall operating performance or alter the composition of the company’s overall book of business; and some uncertainty regarding the ultimate ownership structure of the company.”
