AM Best Comments on Credit Ratings of Fortitude Reinsurance Company Ltd. Following Announced Prudential Annuities Life Assurance Corporation Acquisition
September 21, 2021 by AM Best
OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has commented that the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Fortitude Reinsurance Company Ltd. (Fortitude Re) (Bermuda) remain unchanged following the its parent company’s recent agreement to acquire Prudential Annuities Life Assurance Corporation (PALAC) (Arizona).
AM Best views the acquisition of PALAC, which will be executed by Fortitude Re’s holding company, Fortitude Group Holdings LLC (FGH), to be consistent with the initial new business plan as contemplated during the assignment of Fortitude Re’s Credit Ratings (see press release dated Aug. 9, 2021).
The roughly USD 30 billion of variable annuities acquired in the deal will be funded via excess capital and modest debt issuances at FGH. AM Best views execution risk associated with the transaction to be mitigated partially by the Fortitude Re management team’s extensive expertise in the variable annuity sector, and by the higher certainty around future cash flow patterns resulting from acquiring the business via a secondary market. AM Best notes that while Fortitude Re is not participating directly in the acquisition, the change in FGH’s capitalization could have an impact, as its financial flexibility could become limited if initial assumptions around the acquisition materially change. The transaction is not anticipated to impact the organizations balance sheet strength metrics materially following its anticipated close in first-half 2022. AM Best will continue to monitor the transaction and associated funding as the deal nears its closing date to determine its ultimate impact on risk-adjusted capitalization and balance sheet strength.
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 Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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Dan Hofmeister, CFA, FRM, CAIA, CPCU
Senior Financial Analyst
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