Tag: #Credit

AM Best withdraws credit ratings of Hawaii Dental Service

Post author By Michelle Dryden
Post date September 15, 2020
No Comments on AM Best withdraws credit ratings of Hawaii Dental Service

OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Hawaii Dental Service (Honolulu, HI). The outlook of these Credit Ratings (ratings) is stable. Concurrently, AM Best has withdrawn these ratings as the company has requested to no longer participate in the interactive rating process.

The ratings reflect Hawaii Dental Service’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.

The rating affirmations reflect Hawaii Dental Service’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by a history of favorable operating performance. Hawaii Dental Service has experienced a trend of strong earnings with high single-digit to low double-digit return on revenue and return on equity. Furthermore, the company has grown net premiums over the past five years via new sales and membership retention.

Offsetting factors include business concentration risk as the business is concentrated in dental products in Hawaii. However, the company has strong brand name recognition as it utilizes the Delta Dental brand name and trademarks. Additionally, Hawaii Dental Service has a growing exposure to mutual funds, which composed approximately 50% of the company’s invested assets at year-end 2019. However, this exposure is slightly mitigated as bond funds represented approximately one-third of mutual funds.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Contacts

Brian Virostek
Financial Analyst
+1 908 439 2200, ext. 5531
brian.virostek@ambest.com

Sally Rosen
Senior Director
+1 908 439 2200, ext. 5280
sally.rosen@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Tags #Credit, #Hawaii Dental Service, #Ratings, AM Best, AM Best#Credit

Business

AM Best affirms credit ratings of Ohio National Financial Services, Inc. and its subsidiaries

Post author By Michelle Dryden
Post date September 11, 2020
No Comments on AM Best affirms credit ratings of Ohio National Financial Services, Inc. and its subsidiaries

OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” of The Ohio National Life Insurance Company and its wholly owned subsidiary, Ohio National Life Assurance Corporation (together referred to as the Ohio National Life Group). These companies are the principal insurance subsidiaries of Ohio National Financial Services, Inc. (ONFS), which is an intermediate holding company wholly owned by Ohio National Mutual Holdings, Inc. Concurrently, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of National Security Life and Annuity Company (NSLAC). Additionally, AM Best has affirmed the Long-Term ICR of “bbb+” and all existing Long-Term Issue Credit Ratings (Long-Term IR) of ONFS. The outlook of these Credit Ratings (ratings) is stable. All companies are headquartered in Cincinnati, OH. (See below for a detailed listing of the Long-Term IRs).

The ratings of Ohio National Life Group reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The group’s balance sheet strength assessment is based on its risk-adjusted capitalization being at the very strong level, as measured by Best’s Capital Adequacy Ratio (BCAR), while maintaining strong liquidity. AM Best notes that the group’s risk-adjusted capitalization has been enhanced by the issuance of surplus notes, and the use of captive structures to support redundant statutory reserves and to reduce volatility from its annuity living benefit riders. AM Best considers the group’s consolidated financial leverage and interest coverage ratios to be within acceptable ranges. The assessment of the group’s operating performance considers its long-term positive trend in individual life insurance sales prior to the current disruptions driven by the COVID-19 pandemic, and its stable adjusted GAAP operating results, while the assessment of the group’s ERM recognizes its strong risk management framework, including front-end risk management practices and sound governance structure.

The ratings of NSLAC reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, very limited business profile and appropriate ERM. The ratings also reflect the support of the company’s parent. The company’s balance sheet strength assessment is based on the strongest level of risk-adjusted capitalization, as measured by BCAR, and a high quality investment portfolio. NSLAC was the exclusive distributor of annuities for the group in New York, but is not writing new business currently.

The following Long-Term IRs have been affirmed with a stable outlook:

Ohio National Financial Services, Inc.—

— “bbb+” on $425 million 5.55% senior unsecured notes, due January 2030

— “bbb+” on $250 million 6.625% senior unsecured notes, due May 2031

The Ohio National Life Insurance Company—

— “a-” on $50 million 8.50% surplus notes, due May 2026

— “a-” on $250 million 6.875% surplus notes, due June 2042

Contacts

Christopher Lewis

Financial Analyst
+1 908 439 2200, ext. 5065
christopher.lewis@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Thomas Rosendale

Senior Director
+1 908 439 2200, ext. 5201
thomas.rosendale@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Tags #Credit, #Ratings, AM Best, Excellent, FSR, Ohio National Financial Services Inc., Subsidiaries, Subsidiaries#Credit

Business

AM Best revises outlooks to stable for Constitution Insurance Company

Post author By Michelle Dryden
Post date September 2, 2020
No Comments on AM Best revises outlooks to stable for Constitution Insurance Company

OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Constitution Insurance Company (Constitution) (headquartered in Omaha, NE).

The Credit Ratings (ratings) reflect Constitution’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The stable outlooks consider the enhanced business profile, as Constitution has begun to expand its urban homeowners and dwelling fire books of business. In addition, Constitution now participates on a workers’ compensation quota share program with an affiliated company, which provides some product diversity. Nonetheless, Constitution still faces geographic and product concentrations, and AM Best will continue to monitor the company’s progress with its business plans and execution over the near term.

Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

Contacts

Raymond Thomson, CPCU, ARe, ARM

Director
+1 908 439 2200, ext. 5621
raymond.thomson@ambest.com

Greg Williams
Senior Director
+1 908 439 2200, ext. 5815
greg.willams@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy

Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Tags #Credit, #Financial Strength, #Rating, #Risk, #Stable, AM Best, Constitution Insurance Company, Constitution Insurance Company#Credit

Business

AM Best affirms credit ratings of American International Group, Inc. and most subsidiaries; downgrades Issuer Credit Ratings of life/health subsidiaries

OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has affirmed the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” of American International Group, Inc. (AIG) (headquartered in New York, NY) [NYSE: AIG]. AM Best also has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of “a” of its property/casualty insurance subsidiaries (collectively referred to as AIG PC). The outlook of these Credit Ratings (ratings) is stable. Concurrently, AM Best has downgraded the Long-Term ICR to “a” from “a+” and affirmed the FSR of A (Excellent) for the members of the AIG Life & Retirement Group (AIG L&R). The outlook of the Long-Term ICR has been revised to stable from negative, while the outlook of the FSR is stable. (Please see below for a detailed listing of the companies and ratings.)

AIG’s ratings reflect its consolidated risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), which is an improvement from the very strong level seen in the 2019 review period. Additionally, consolidated risk-adjusted capital is likely to improve now that the Fortitude Reinsurance Company Ltd. (Fortitude RE) transaction has closed. While the closing of Fortitude RE brought with it significant write-downs during 2020, these write-downs did not impact the general insurance or life and retirement statutory entities, and cash flow is still expected to be positive. Overall, AM Best views this transaction as positive for AIG as it sheds longer-tail risk liabilities, along with potentially riskier, longer-duration assets paired with those reserves. Access to the capital markets and significant liquidity at the holding company level also aids the balance sheet. An offsetting factor in the balance sheet strength assessment is the increase in financial leverage and a lower interest coverage ratio expected for 2020.

AIG’s historical operating performance has been hampered by significant losses in general insurance, but the company has made strides in refining its risk profile and AM Best expects further improvement. AIG’s business profile is global, with a distinctly diverse set of property/casualty and life and annuity products, a broad distribution network and significant market share on many of its lines of business.

The ratings of AIG PC reflect the group’s balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, favorable business profile and appropriate enterprise risk management (ERM).

AIG PC’s risk-adjusted capital position improved in 2019, reflective of a material reduction in net loss reserves as the group continues to pay down claims for older accident years. The group’s balance sheet strength continues to benefit from reinsurance support from highly rated companies. Offsetting these positive factors is the continued reduction in surplus levels that have decreased in each of the past five years, as well as the group’s high gross underwriting leverage, which has risen in recent years as a result of increased use of reinsurance to curb volatility and increase underwriting profitability.

AM Best views AIG PC’s operating performance as marginal. The group has been materially impacted over the last five years by underwriting losses and a reduction in investment income, leading to a five-year operating ratio of 102.1 that continues to lag the commercial casualty composite performance over the same time period by a considerable margin. However, AM Best notes that the group’s operating performance has demonstrated a steadily improving trend for the past three calendar years, attributable to numerous underwriting and risk management initiatives, as well as positive pricing momentum in most key business lines. The potential for further improvement in the near term is reduced by uncertainty related to the COVID-19 pandemic, which could dampen growth opportunities, increase underwriting losses and creates the possibility of investment impairments.

The ratings of AIG L&R ratings reflect its balance sheet strength, which AM Best categorizes as adequate, as well as its strong operating performance, favorable business profile and appropriate ERM.

The Long-Term ICR downgrade reflects a revision in AM Best’s assessment of the AIG L&R’s operating performance to strong from very strong. AM Best believes the group’s more-recent returns, and prospective returns, will be more in line with its strong rated peers, driven by intense competition within the annuity segment and record low interest rates, both of which are likely to continue to drive spread income and fee income lower. In addition, the low interest rate environment is likely to negatively impact the top and bottom lines within the individual and group annuity segments.

AIG L&R’s balance sheet assessment remains stable at adequate, and its year-over-year risk-adjusted capital position remains virtually unchanged at year-end 2019. The risk-adjusted capital position benefits from the large modified coinsurance agreement with Fortitude RE, which reduces much of the risk from the longer-term structured settlements book of business. AIG L&R has had a high dividend payout ratio back to the parent due in large part to a series of de-risking practices, which has lowered the need for additional capital, but overall capital and surplus growth has been limited. Going forward, the parent holding company may become less reliant on AIG L&R dividends due its recent sale of Fortitude RE, increased liquidity and improving performance within its general insurance segment. AIG L&R’s ratings also reflect its favorable business profile with a diverse set of product offerings and national reach with its robust distribution network.

The FSR of A (Excellent) and the Long-Term ICRs of “a” have been affirmed with stable outlooks for the following subsidiaries of AIG, which are collectively referred to as the AIG Property Casualty Insurance Group:

National Union Fire Insurance Company of Pittsburgh, PA
American Home Assurance Company
Lexington Insurance Company
Commerce and Industry Insurance Company
AIG Property Casualty Company
The Insurance Company of the State of Pennsylvania
New Hampshire Insurance Company
Illinois National Insurance Company
AIG Specialty Insurance Company
AIU Insurance Company
AIG Assurance Company
AIG Insurance Company – Puerto Rico
AIG Insurance Company of Canada
AIG Insurance Hong Kong Limited
Granite State Insurance Company
Tudor Insurance Company
Stratford Insurance Company
Western World Insurance Company
Blackboard Specialty Insurance Company
Blackboard Insurance Company
American International Group UK Limited
American International Reinsurance Company, Ltd.
AIG Asia Pacific Insurance Pte. Ltd.
Validus Reinsurance, Ltd.
Validus Reinsurance (Switzerland) Ltd.

The Long-Term ICRs have been downgraded to “a” from “a+” and the FSR of A (Excellent) affirmed, with the outlook of the Long-Term ICR revised to stable from negative and the FSR outlook maintained as stable, for the following operating subsidiaries of AIG, which are collectively referred to as the AIG Life & Retirement Group:

AGC Life Insurance Company
American General Life Insurance Company
United States Life Insurance Company in the City of New York
The Variable Annuity Life Insurance Company

Contacts

Gregory Dickerson
Associate Director—P/C
+1 908 439 2200, ext. 5161
gregory.dickerson@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Erik Miller
Associate Director—L/H
+1 908 439 2200, ext. 5187
erik.miller@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Tags #Credit, #Financial Strength, #Life, #Rating, AM Best, American International Group Inc., Business, health, Retirement, Subsidiaries, Subsidiaries#Credit

Business

AM Best affirms credit ratings of State Farm Mutual Automobile Insurance Company and most of its subsidiaries

Post author By Michelle Dryden
Post date August 15, 2020
No Comments on AM Best affirms credit ratings of State Farm Mutual Automobile Insurance Company and most of its subsidiaries

OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa+” of State Farm Mutual Automobile Insurance Company (State Farm Mutual) and its affiliates, State Farm Fire and Casualty Company and State Farm County Mutual Insurance Company of Texas (Richardson, TX). In addition, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of HiRoad Assurance Company (HiRoad). AM Best also has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” of Dover Bay Specialty Insurance Company (Dover Bay). Concurrently, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of State Farm Florida Insurance Company (State Farm Florida) (Winter Haven, FL). The outlook of these Credit Ratings (ratings) is stable. AM Best has also affirmed the FSR of A (Excellent) and the Long-Term ICR of “a+” of State Farm General Insurance Company. The outlook of the FSR is stable while the outlook of the Long-Term ICR is negative. In addition, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of State Farm Indemnity Company (State Farm Indemnity). The outlook of these ratings is positive. Concurrently, AM Best has affirmed the FSR of A++ (Superior) and the Long-Term ICRs of “aa+” of State Farm Life Insurance Company and State Farm Life and Accident Assurance Company (together referred to as State Farm Life). The outlook of these ratings is stable.

At the same time, AM Best has upgraded the FSR to A (Excellent) from A- (Excellent) and the Long-Term ICR to “a” from “a-” of State Farm Lloyds (Richardson, TX). The outlook of these ratings has been revised to stable from positive. All companies are headquartered in Bloomington, IL, except where specified.

The ratings of State Farm Mutual reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, very favorable business profile and appropriate enterprise risk management (ERM).

Additionally, the ratings reflect State Farm Mutual’s strong net income generation despite challenging market conditions in recent years, and AM Best’s expectation that the company will continue to generate solid earnings and maintain excellent risk-adjusted capitalization, despite the currently high state of economic uncertainty in the United States. State Farm Mutual, its subsidiary and affiliated property/casualty and life insurance companies, comprise the largest personal lines insurance organization in the United States based on direct premiums written and the second largest in terms of policyholders’ surplus. The State Farm group remains the leading provider of private passenger automobile and homeowners’ insurance in the United States. The organization’s personal lines products are complemented by other lines of business such as commercial multi-peril, commercial auto liability, workers’ compensation and several other lines. The ratings of the subsidiaries and affiliates of State Farm Mutual benefit from shared services, common management, cross selling of products and services, common distribution and brand name recognition. These positive rating aspects are offset in part by the State Farm group’s underwriting variability, above-average exposure to equity market volatility and susceptibility to weather-related catastrophes.

The ratings of State Farm Lloyds reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. The rating upgrades of State Farm Lloyds recognize its consistently excellent risk-adjusted capitalization and that the company’s underwriting and net leverage ratios have stabilized at levels that are significantly improved relative to levels reported several years ago.

The ratings of State Farm General reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. The ratings also reflect lift, as defined within Best’s Credit Rating Methodology (BCRM), from its parent, State Farm Mutual.

The negative outlook for State Farm General’s Long-Term ICR considers deteriorating operating performance and capital erosion observed in 2017 and 2018, when the company was significantly impacted by California wildfire losses. AM Best notes that the company reported much improved results and surplus generation in 2019 and through the first quarter of 2020. If these favorable trends are sustained over the next 12-24 months, the Long-Term ICR outlook could be revised to stable.

The ratings of State Farm Indemnity reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its marginal operating performance, neutral business profile and appropriate ERM. The positive outlook for State Farm Indemnity’s ratings recognizing favorable trends in underwriting results for the past few years. AM Best notes that State Farm has announced significant rate decreases for personal auto insurance in New Jersey, which comprises the entirety of Indemnity’s business. These ratings could be upgraded if the company sustains its improved underwriting performance while maintaining its strongest level of risk-adjusted capitalization. The outlooks could be revised to stable from positive if the company’s operating performance deteriorates from current levels.

The ratings of HiRoad reflect its balance sheet strength, which AM Best categorizes as adequate, as well as its marginal operating performance, limited business profile and appropriate ERM. The ratings also reflect lift, as defined within Best’s Credit Rating Methodology (BCRM), from its parent, State Farm Mutual.

The ratings of Dover Bay reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM. The ratings also reflect lift, as defined within BCRM, from its parent, State Farm Mutual.

The ratings of State Farm Florida reflect its balance sheet strength, which AM Best categorizes as adequate, as well as its adequate operating performance, neutral business profile and appropriate ERM. The ratings also reflect lift, as defined within BCRM, from its parent, State Farm Mutual.

The ratings of State Farm Life reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate ERM. The ratings also reflect lift, as defined within BCRM, from its parent, State Farm Mutual

Additionally, the ratings of State Farm Life benefit from strong brand-name recognition, sustained competitive advantages derived from an affiliated exclusive agency field force, and a diverse product portfolio of individual ordinary life and fixed annuity products. Further, State Farm Life finances its statutorily required excess reserves (Regulation XXX) related to term life insurance through capital rather than externally through either domestic captives or offshore reinsurers. The amount of these excess reserves is sizeable and viewed favorably by AM Best, as it qualitatively enhances the group’s strong risk-adjusted capitalization ratios. Partially offsetting rating factors are ongoing spread compression within its annuity block, losses within its supplementary contracts line of business and exposure to life business with significant minimum guarantee rates.

Contacts

Gregory Dickerson
Associate Director
+1 908 439 2200, ext. 5161
gregory.dickerson@ambest.com

Raymond Thomson, CPCU, ARe, ARM

Director

+1 908 439 2200, ext. 5621

raymond.thomson@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy

Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Tags #Credit, #Ratings, AM Best, Business, Life Insurance, State Farm Mutual Automobile Insurance Company, Subsidiaries, Subsidiaries#Credit

Business

AM Best removes from under review with developing implications and upgrades credit ratings of Merit Life Insurance Co.

Post author By Michelle Dryden
Post date August 13, 2020
No Comments on AM Best removes from under review with developing implications and upgrades credit ratings of Merit Life Insurance Co.

OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has removed from under review with developing implications and upgraded the Financial Strength Rating to A- (Excellent) from B+ (Good) and the Long-Term Issuer Credit Rating to “a-” from “bbb-” of Merit Life Insurance Co. (Merit) (Austin, TX). The outlook assigned to these ratings is stable.

The ratings reflect Merit’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The company’s balance sheet strength assessment is anchored by its Best’s Capital Adequacy Ratio, which is considered to be at the strongest level. Merit’s flagship Contingent Deferred Annuity (CDA) product guarantees individuals a stream of income (i.e., 5% of the greater of the account value on the issue or exercise date) for life if the value of the purchaser’s account is reduced to zero during their lifetime. Each annuitant’s assets are to be managed by their fiduciary investment manager and will have predetermined investment parameters created by the investment management firm and agreed to by Merit. The company’s general account investment portfolio is expected to be well-diversified with a favorable level of liquidity. Brickell Insurance Holdings LLC (Brickell) acquired Merit on Dec. 31, 2019. 777 Partners, one of Brickell’s primary investors, is committed to supporting Merit’s risk-adjusted capitalization and will be making additional capital contributions as necessary to support growth.

The company’s operating performance assessment is based solely on projections provided by company management and include assumptions around expense efficiency and the generation of specific levels of fee income. AM Best notes that prospective earnings will be derived primarily from fees earned on protected assets and will be subject to equity market fluctuations. The company continues to file for state approvals on the CDA product, but has not yet commenced sales. Due to its limited product offerings and distribution channels its business profile is considered to be limited at this time.

Contacts

Kate Steffanelli

Senior Financial Analyst

+1 908 439 2200, ext. 5063

kate.steffanelli@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Michael Adams
Associate Director
+1 908 439 2200, ext. 5133

michael.adams@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Tags #Credit, #Ratings, #Upgrade, AM Best, Best Capital Adequacy Ratio, Business, Developing, Financial, Implications, market, Merit Life Insurance, Review, Review#Credit

Business

AM Best places credit ratings of Third Point Reinsurance Ltd. and its subsidiaries under review with developing implications

OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has placed under review with developing implications the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of Third Point Reinsurance Company Ltd. (Bermuda) and Third Point Reinsurance (USA) Ltd. (Bermuda). AM Best also has placed under review with developing implications the Long-Term ICRs of “bbb-” of Third Point Re (USA) Holdings, Inc. (TP USA) (Wilmington, DE) and its ultimate holding company, Third Point Reinsurance Ltd. (TPRE) [NYSE: TPRE] (Bermuda). Concurrently, AM Best has placed under review with developing implications the Long-Term Issue Credit Rating of “bbb-” on the $115 million 7% fixed senior unsecured notes due 2025 of TP USA.

The under review rating action follows the group’s announcement that TPRE has entered into a definitive agreement to acquire Sirius International Insurance Group, Ltd. (SIIG) (Bermuda) [NASDAQ: SG] at a transaction value of approximately $788 million. TPRE will finance the transaction through a combination of cash-on-hand and equity issued to Sirius Group shareholders. SIIG currently has $685 million of debt that will remain outstanding and $223 million of preferred shares, which will be redeemed as part of the transaction.

AM Best will continue to hold discussions with TPRE management and monitor the group’s balance sheet strength, operating performance, business profile and enterprise risk management. The transaction is expected to close in the first quarter of 2021, subject to customary closing conditions and regulatory approvals. The ratings will remain under review until the close of the transaction and a review by AM Best of the post-transaction details.

The under review with developing implications status reflects the need for AM Best to fully assess the financial and operational impacts of the SIIG acquisition, including potential benefits to TPRE’s group business profile following the close of the transaction. The addition of the SIIG business is expected to add approximately $1.9 billion to TPRE’s $600 million in gross premium written. The additional business not only adds size, which is expected to enhance TPRE’s market profile and add scale, but augments business diversification as SIIG has a larger global presence and has insurance operations in addition to its reinsurance platform.

TPRE’s balance sheet strength is expected to remain at a very strong level despite the acquisition of Sirius, which maintains a higher level of financial and underwriting leverage and a significant amount of safety reserves moderating the fungibility of capital. Risk-adjusted capital should benefit further as TPRE’s already reduced concentration in alternative investments will be a significantly smaller portion of total invested assets of the combined entity; AM Best expects that a significant majority share of investments will be composed of investment-grade, fixed-income securities and equities that will act as a portfolio ballast.

This transaction includes a significant ownership interest in TPRE by China Minsheng Investment Group Corp., Ltd. (CMIG), which is expected to acquire approximately a 35% stake in TPRE. CMIG has a significantly weaker credit quality than Third Point Re and has lacked transparency when dealing with AM Best. The risk involved with CMIG ownership is moderated by its limited voting control, which will be less than 10% of the voting shares. CMIG currently owns 96% of Sirius.

Contacts

Darian Ryan, CPA

Senior Financial Analyst

+1 908 439 2200, ext. 5449

darian.ryan@ambest.com

Steve Chirico, CPA

Director

+1 908 439 2200, ext. 5087

steve.chirico@ambest.com

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Jim Peavy

Director, Public Relations

+1 908 439 2200, ext. 5644

james.peavy@ambest.com

Tags #Credit, #Ratings, AM Best, Business, Financial, Insurance, Investment, Review, Subsidiaries, Third Point Reinsurance Ltd., Third Point Reinsurance Ltd.#Credit

Business

AM Best affirms Issue Credit Rating of Weston2038 LLC’s Credit-Linked Note

Post author By Michelle Dryden
Post date July 24, 2020
No Comments on AM Best affirms Issue Credit Rating of Weston2038 LLC’s Credit-Linked Note

OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has affirmed the Long-Term Issue Credit Rating (Long-Term IR) of “a” to the $846 million (of which $742 million remains outstanding) 6.00% Variable Funding Credit-Linked Note (note), due July 1, 2038, issued by Weston2038 LLC (Weston2038), a Delaware limited liability company (issuer). The outlook of the Credit Rating (rating) is stable.

The note is in consideration for a Variable Funding Surplus Note issued by Redding Reassurance Company 3 LLC (Redding Re 3), a Missouri-domiciled special purpose financial captive reinsurer and a direct wholly owned subsidiary of Wilton Reassurance Company (Wilton Reassurance). The Variable Funding Surplus Note is used to support excess reserves for a specified block life business policies ceded by Wilton Reassurance on a coinsurance basis to Redding Re 3.

Redding Re 3 issued a Surplus Note (in the form of a Variable Surplus Note) to Weston2038 with a face amount equal to the initial amount of excess reserves, in exchange for the Weston2038-issued note with an equivalent face amount. The Variable Surplus Note and note have the same interest rate. Concurrently, Weston2038 entered into a risk transfer agreement (i.e., cash-settled ISDA swap) with Hannover Life Reassurance Company of America (Bermuda) Ltd. (Hannover Re Bermuda) to provide liquidity for any redemption/monetization of the note.

As of December 2019, statutory reserves, economic reserves and excess reserves were in line with the projected results.

The rating action represents AM Best’s current opinion as to the issuer’s ability to meet its financial obligations to the noteholders when due. The rating primarily takes into consideration the following: Hannover Re Bermuda’s Long-Term Issuer Credit Rating of “aa” as the swap counterparty to Weston2038; netting arrangements among transaction parties; no reserves or funds at Weston2038, except reliance on funds provided by Redding Re 3; and potential legal risks at it relates to enforceability of the various transaction agreements.

The Long-Term IR could be upgraded or downgraded and/or the outlook revised if material changes occur in the financial condition and credit ratings of Hannover Re Bermuda.

Contacts

Alma W. Nieves

Financial Analyst,

Insurance-Linked Securities

+1 908 439 2200, ext. 5713
alma.nieves@ambest.com

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Yuhmei Chen

Senior Financial Analyst,

Insurance-Linked Securities

+1 908 439 2200, ext. 5236
yuhmei.chen@ambest.com

Jim Peavy

Director, Public Relations

+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Tags #Credit, AM Best, Business, Credit-Linked Note, Hanover Life Reassurance Company of America, Liquidity, Long-Term Issue Credit Rating, Monetization, Redding Reassurance Company 3 LLC, Redemption, Reserves, Weston2038, Wilton Reassurance Company, Wilton Reassurance Company#Credit