|[January 06, 2014]
Fitch Affirms Wilton Re's IFS Rating at 'A'; Outlook Stable
CHICAGO --(Business Wire)--
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.
KEY RATING DRIVERS
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
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) securiies.
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
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.
Factors that could trigger a negative rating action include:
--A financial leverage increase above 25%;
--Large transactions outside the company's historical risk preference or
expertise or any other material changes in risk appetite for the company;
--A sustained drop in the company's risk-adjusted capital position with
no plans or ability to rectify;
--A decline in GAAP operating ROE below 10%;
--A change in regulation that would materially increase or change the
company's current reserving, capitalization or redundant statutory
reserve collateral requirements.
Factors that could trigger a positive rating action include:
--Improved scale and diversification of Wilton's Re core U.S. life
--Continued growth in profitability and successful execution of
management plans and additional seasoning of the company's in-force book
--Maintenance of capital levels at or above current levels on a
Fitch affirms the following ratings:
Wilton Reassurance Company
Wilton Reinsurance Bermuda Limited
Wilton Reassurance Life Company of New York
Texas Life Insurance Company
--IFS at 'A'; Outlook Stable.
Wilton Re Holdings Limited
--Long-term IDR at 'BBB+'; Outlook Stable.
Wilton Re Finance LLC
--5.875% Senior Notes due March 30, 2033 at 'BBB'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Insurance Rating Methodology', dated Nov. 13, 2013.
Applicable Criteria and Related Research:
Insurance Rating Methodology -- Amended
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