Moody’s Ratings has upgraded the insurance financial strength (IFS) ratings of Talcott Resolution Life Insurance Company and Talcott Resolution Life and Annuity Insurance Company from Baa2 to Baa1.
The company also upgraded the senior unsecured debt rating of Talcott Resolution Life, Inc. and the issuer rating of Talcott Financial Group, Ltd. to Ba1 from Ba2.
Moody’s explains that these enhancements signify the firm’s transition from a runoff business to an active aggregator of legacy blocks and a capital provider to direct insurance partners through flow reinsurance, strengthening its market position and brand.
Talcott currently benefits from stable cash flows generated by its mature in-force business and careful risk management. However, the company faces substantial exposure to earnings and capital volatility, necessitating careful management of capital requirements across various jurisdictions.
The short-term IFS for Talcott Resolution Life Insurance Company was affirmed at P-2 as the outlooks of the Talcott entities remain positive.
Moody’s stated that these changes were due to the recent large transactions and potential future transactions that have been assessed to greatly enhance Talcott’s business profile if successfully executed and integrated. Moody’s warns that associated fast growth also presents execution risks.
Talcott’s ratings could fluctuate depending on the successful execution of growth strategy, minimising the volatility, and effective management of the enforce business that results in a consistent capital generation. Moody’s will keep an eye out for any discrepancies that could downgrade this outlook as well.
A sustained NAIC RBC ratio level (company action level) below 350% or BSCR ratio below 175%, a material increase in investment risk or complexity, and financial leverage at Talcott above 35% could cause a downgrade.
