Corebridge Financial, the recently rebranded Life & Retirement business of AIG, has been assigned a Baa2 long-term issuer rating by Moody’s, and has had the A2 insurance financial strength ratings of its life insurance subsidiaries affirmed, with all ratings carrying a stable outlook.
Corebridge is an intermediate holding company that is currently majority owned by AIG, and will serve as the public holding company for the life insurance group, as it proceeds towards an initial public offering (IPO) in its separation from the AIG property & casualty operation announced last year.
Moody’s explained the Corebridge issuer rating and the life company credit rating affirmations were based on the Corebridge life and retirement group’s leading positions in a number of US individual annuity and retirement product markets, its broad distribution network, and solid profitability.
The rating agency believes the group’s stand-alone credit profile is consistent with similarly rated peers, with anticipated consolidated GAAP adjusted leverage in the 20%-30% range and good earnings coverage.
However, these strengths are mitigated by significant interest rate risk and spread compression/ disintermediation risks arising from the group’s core fixed indexed annuity (FIA) and fixed annuity businesses, Moody’s said.
It also saw negative factors in Corebridge’s significant exposure to equity market and hedging risks from its individual variable annuity (VA) liabilities and FIAs, and due to its concentration in structured assets holdings.
Commenting on the outlook change back to stable from negative, the rating agency said it contemplates an incremental increase in asset risk and illiquidity, and greater potential incremental earnings volatility over time, although within its current expectations for the Corebridge group’s ratings.
In November 2021, the former SAFG, now Corebridge, entered into an investment arrangement for Blackstone to manage up to $92.5 billion of the life insurance group’s invested assets over the next six years, including the first $50 billion as of year-end 2021.
Blackstone, which is also a 9.9% owner of Corebridge, will re-invest the assets in structured assets, private credit and real estate investments, etc., which are asset classes in which it has expertise.
Moody’s expects the reinvestment to add potential incremental yield, as well as incrementally more earnings and capital volatility as compared with publicly traded bonds.