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Best’s News & Research Service - April 24, 2015 11:16 AM (EDT)

A.M. Best Upgrades Issuer Credit Ratings of Wilton Re Ltd and Its Subsidiaries

  • April 24, 2015 11:16 AM (EDT)
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Oldwick //BestWire// - 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.

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.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at .

Key insurance criteria reports utilized:

  • A.M. Best's Perspective on Operating Leverage

  • Analyzing Insurance Holding Company Liquidity

  • Evaluating Non-Insurance Ultimate Parents

  • Insurance Holding Company and Debt Ratings

  • Rating Members of Insurance Groups

  • Rating Run-Off Insurers and Specialists

  • Risk Management and the Rating Process for Insurance Companies

  • Understanding BCAR for U.S. and Canadian Life/Health Insurers

  • Understanding Universal BCAR

This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best's Ratings & Criteria Center.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.

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