A.M. Best Revises Outlook to Positive for Athene USA Group’s Members; Assigns Ratings to Athene Life Re and Athene Holding Ltd
October 22, 2014 by Best's News Service
Oldwick – A.M. Best has revised the outlook to positive from stable and affirmed the financial strength rating (FSR) of B++ (Good) and the issuer credit ratings (ICR) of “bbb+” of the members of Athene USA Group (AUSAG). (See below for a detailed listing of AUSAG’s group members and ratings.) AUSAG is the consolidating rating unit for the U.S. operating companies, which focus on operating in the fixed indexed annuity segment.
Concurrently, A.M. Best has assigned a FSR of B++ (Good) and an ICR of “bbb+” to Athene Life Re (ALRe), and an ICR of “bb+” to Athene Holding Ltd (AHL). Both companies are domiciled in Bermuda. The outlook assigned to these ratings is positive. ALRe operates as a reinsurer to AUSAG and other third parties. AHL operates as the consolidated holding company for the U.S. and Bermuda operations.
The outlook revision for AUSAG is based on a strong management team with proven ability to grow capital organically and from new capital generation in the private placement market, as well as the ability to integrate Aviva, a much larger entity.
The ICR assignment of AHL, along with the ratings of ALRe, reflect the growth in capital, on an absolute and risk-adjusted basis, that has enabled AHL, its operating entities and ALRe to strengthen their balance sheets while providing sufficient capital support for retail growth. AHL has more capital to draw down as part of their private placement pre-IPO offering executed on earlier in the year. This is expected to improve the capital profile further in the near term.
Partially offsetting these positive rating factors are the pressures associated with managing assets in a low interest rate environment, in addition to material weaknesses in its internal controls over financial reporting for certain actuarial balances and the preparation and accuracy of tax balances. The material weakness issues are anticipated to be corrected in the near term. Until then, they are considered a drag to the ratings.
Positive rating actions on all the rated entities could be considered after the material weakness issues have been resolved and the financial impact from that matter concluded, in addition to a full-year financial reporting cycle review by A.M. Best on a post-Aviva acquisition basis, demonstrating consistent profitable operations with no significant increase in risk metrics. Downward rating actions could result if AUSAG experiences operating losses, poor investment performance or holds lower levels of risk-based capitalization at the group level or at any one of the operating companies within the group.
The FSR of B++ (Good) and the ICRs of “bbb+” have been affirmed and the outlook revised to positive from stable for the following members of Athene USA Group:
- Athene Annuity & Life Assurance Company
- Athene Annuity & Life Assurance Company of New York
- Athene Annuity and Life Company
- Athene Life Insurance Company of NY
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 www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Rating Members of Insurance Groups
- A.M. Best’s Perspective on Operating Leverage
- Understanding BCAR for U.S. and Canadian Life/Health Insurers
- Risk Management and the Rating Process for Insurance Companies
- Understanding Universal BCAR
A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.