Best’s News & Research Service - July 29, 2022 02:12 PM (EDT)
AM Best Affirms Credit Ratings of Talcott Resolution Life, Inc. and Its Subsidiaries
- July 29, 2022 02:12 PM (EDT)
Oldwick //BestWire// - AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “bbb+” (Good) of Talcott Resolution Life Insurance Company and Talcott Resolution Life and Annuity Insurance Company. These companies are domiciled in Windsor, CT, and collectively are referred to as Talcott Resolution Group (Talcott Resolution or the group). Additionally, AM Best has affirmed the Long-Term ICR of “bbb-” (Good) of Talcott Resolution Life, Inc. (Delaware), along with its Long-Term Issue Credit Ratings (Long-Term IRs). The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the Long-Term IRs).
The ratings reflect Talcott Resolution’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Talcott Resolution maintains a strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), despite a sharp decline during the year primarily due to stockholder dividends to fund large block acquisitions for its affiliated offshore insurance entities, as well as nonrecurring transaction costs from its 2021 acquisition by Sixth Street. The balance sheet strength assessment also reflects the good fungibility of capital within the Talcott organization and access to additional capital from its parent if needed. AM Best notes that invested asset allocations became more conservative in 2021 with lower allocations in mortgage loans, alternative investments and other riskier asset classes, while allocating more into cash, short-term investments and bonds. The group also continues to have a sufficient hedge program in place to protect statutory capital from potential negative impacts due to equity and interest rate sensitivities within its core variable and fixed annuity businesses.
In 2021, Talcott Resolution was sold to Sixth Street, a leading global investment firm. Shortly after the close of Talcott Resolution’s sale, the group was involved in several large reinsurance transactions, which bolstered its business profile and increased its overall importance to the Talcott organization. Talcott Resolution also benefits from a fully developed ERM program with extensive modeling in place to mitigate product-risks. The risk management program also includes a dynamic approach to liquidity and stress testing under a multitude of scenarios.
While Talcott Resolution’s business profile has been enhanced under its ownership by Sixth Street and subsequent reinsurance transactions, the group’s product risk is considered to be high due to the long-tail nature of its liabilities being heavily weighted in individual annuities. In addition, the group operates in a highly competitive market environment and the significant amount of transactions within the Talcott organization over the past year have resulted in an increased level of execution risk. AM Best will continue to monitor Talcott Resolution’s current business strategy of attempting to grow its platform by providing risk transfer solutions to the insurance industry through reinsurance or acquisitions.
The following Long-Term IRs have been affirmed with a stable outlook:
Talcott Resolution Life, Inc.—
— “bbb-” (Good) on $250 million 7.65% senior unsecured debentures, due 2027 (approximately $80 million outstanding)
— “bbb-” (Good) on $400 million 7.375% senior unsecured notes, due 2031 (approximately $63 million outstanding)
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 use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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 London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.