Fitch Ratings has revised Fortitude Re’s outlook to Positive from Stable, citing the firm’s improving profile driven by growth and enhanced diversification across liabilities and geographies, alongside its strong balance sheet.
The rating agency has also affirmed Fortitude Reinsurance Company (FRL) and Fortitude Life Insurance and Annuity Company’s (FLIAC) Insurer Financial Strength (IFS) ratings at ‘BBB+’.
In addition, Fitch has affirmed the ‘BBB’ Issuer Default Ratings (IDRs) for FRL’s holding companies: Fortitude Group Holdings, LLC (FGH) and FGH Parent, L.P. (collectively, Fortitude).
Among the key factors supporting the ratings, Fitch highlighted Fortitude’s continued expansion through acquisitions, including FRL’s fourth-quarter 2023 assumption of $28 billion in life insurance and annuity reserves from The Lincoln National Life Insurance Company.
Fortitude additionally continues to expand in Japan, having completed five reinsurance transactions, including two flow deals to date.
“Fitch would view further profitable growth favourably, along with deal performance aligning closely with pricing expectations,” the rating agency said.
Meanwhile, Fitch emphasised Fortitude’s growing track record, noting that since its acquisition by an investor group led by The Carlyle Group and T&D Holdings in 2020, the company has completed 14 transactions, adding over $100 billion in total reserves.
In 2022, Fortitude completed its largest deal since inception, assuming $31 billion of legacy variable annuities (VA) from Prudential Financial, Inc.
Another key rating driver is Fortitude’s capital position, which is viewed by the rating agency as strong.
Fitch added, “Following the Lincoln transaction, the company’s excess capital declined, with its Prism score declining to ‘Strong’, which aligns with rating expectations. Fitch expects FRL’s Bermuda enhanced capital ratio to remain above 150%.
“FRL benefits as a composite insurer due to the Bermuda capital diversification benefit, compared with peers competing for the acquisition of runoff blocks. Financial leverage increased to 22% as of Q£24, consisting of $1.5 billion in term loans, and is expected to be in the 20%-25% range over the longer term.”
