AM Best Upgrade Wilton Re Credit Ratings
A.M. Best has upgraded the Financial Strength Ratings [FSR] to A+ [Superior] from A [Excellent] and the Long-Term Issuer Credit Ratings [Long-Term ICR] to “aa-” from “a+” of Wilton Reinsurance Bermuda Limited [Bermuda] and its subsidiaries. The outlook of these Credit Ratings has been revised to stable from positive.
A statement from the ratings agency said, “A.M. Best also has upgraded the Long-Term ICRs to “a-” from “bbb+” of Wilton Re Ltd [Nova Scotia, Canada] and Wilton Re Finance, LLC [Wilton Re Finance] [Delaware], as well as the Long-Term Issue Credit Rating to “a-” 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 companies, Wilton Re U.S. Holdings, Inc. and Wilton Re Ltd. A.M. Best notes that Wilton Re Ltd’s adjusted financial leverage and interest coverage are within A.M. Best’s expectation. The outlook of these ratings has been revised to stable from positive.
“Additionally, A.M. Best has affirmed the FSR of A [Excellent] and the Long-Term ICR of “a” of ivari [Toronto, Ontario, Canada]. The outlook of these ratings is stable.
“The rating actions reflect Wilton Re’s solid risk-adjusted capitalization level, consistently strong operating earnings on its U.S. business, and high quality balance sheet and stable liability structure, which are focused principally on mortality risk. The ratings also recognize the ongoing commitment by the company’s highly rated ultimate parent, Canada Pension Plan Investment Board [CPPIB], to provide capital to Wilton Re in support of future growth.
“While Wilton Re’s operations generate significant capital, which can be deployed to fund growth, A.M. Best believes that CPPIB would provide additional funding, if needed. Also noted is Wilton Re’s recent announcement of the definitive agreement to acquire Aegon N.V.’s Transamerica Life subsidiaries’ U.S. run-off payout annuity and bank-owned/corporate-owned life insurance businesses, which includes $14 billion of general account and separate account liabilities.
“This transaction will be funded with Wilton Re’s internal capital and will add significantly to the company’s liability profile. Wilton Re’s continued strategy of closed block acquisitions is viewed positively, as it enhances the embedded value of the organization, and its future earnings and capital generation capabilities.
“Partially offsetting these positive rating attributes is the impact of the continued low interest rate environment, which has modestly impacted earnings on fixed income investments and created challenges with asset liability duration matching. Operating results also have been dampened recently by adverse mortality trends for the industry.
“Other offsetting rating factors include potential execution risks and competition associated with acquiring larger blocks of business. Additionally, Wilton Re also has incurred some operating earnings volatility, reflecting ivari’s accounting sensitivity to changes in Canada’s interest rates and equity markets.”
