AM Best Upgrade Wilton Re Issuer Credit Ratings
A.M. Best has upgraded the issuer credit ratings [ICR] to “a+” from “a” and affirmed the financial strength rating of A [Excellent] of Wilton Reinsurance Bermuda Limited [Bermuda], Wilton Reassurance Company [Minneapolis, MN], Texas Life Insurance Company [Waco, TX], Heritage Union Life Insurance Company [headquartered in Wilton, CT], Wilton Reassurance Life Company of New York [Rye Brook, NY], Wilcac Life Insurance Company [formerly known as Continental Assurance Company] [Chicago, IL] and Conseco Life Insurance Company [Carmel, IN], collectively referred to as Wilton Re. The outlook for all ratings is stable.
A statement from the ratings agency said, “Additionally, A.M. Best has upgraded the ICRs to “bbb+” from “bbb” of Wilton Re Ltd [Nova Scotia, Canada] and Wilton Re Finance, LLC [Wilton Re Finance] [Delaware], as well as the debt rating to “bbb+” from “bbb” on the $300 million 5.875% senior unsecured notes due 2033 of Wilton Re Finance. The notes are unconditionally guaranteed by its parent, Wilton Re U.S. Holdings, Inc. [Delaware] and the ultimate parent, Wilton Re Ltd. A.M. Best notes that Wilton Re Ltd’s adjusted financial leverage and interest coverage are within A.M. Best’s expectations. The outlook for these ratings is stable.
“The rating upgrades reflect Wilton Re’s solid risk-adjusted capitalization level, its recent increased transaction activity, strong operating earnings and high quality balance sheet and liability structure, which are principally focused on mortality risk. Also recognized is the ongoing commitment by the new ultimate parent, Canada Pension Plan Investment Board [CPPIB], to provide capital to Wilton Re in support of continued growth. This was demonstrated by the CPPIB’s funding of Wilton Re’s recent $1.2 billion XXX/AXXX statutory reserve refinance and the pending purchase of Transamerica Life Canada [TLC]. The TLC transaction will add to Wilton Re’s geographical diversification by providing an in-force book of Canadian life business and a platform to expand into Canada’s marketplace. Following the transaction, it is expected that Wilton Re and its insurance subsidiaries will remain adequately capitalized.
“Partially offsetting these positive rating attributes include the impact of the continued low interest rate environment, which has modestly impacted earnings on fixed income investments. Other offsetting rating factors include potential execution risks and competition associated with acquiring larger blocks of business. With regards to the pending acquisition of TLC, A.M. Best believes Wilton Re could also face some earnings volatility given TLC’s past operating sensitivity to changes in Canadian interest rates and equity markets. A.M. Best will continue to review the transaction structure, along with its impact on Wilton Re’s operating results upon completion.
“Factors that may lead to positive rating actions include continued successful execution and integration of profitable mortality reinsurance deals that would enhance the business profile of the group while maintaining solid risk-adjusted capitalization levels. Factors that may lead to future negative rating actions include a material decline in capital, change in parental support or weakening of profitability.”
