According to a recent Fitch Ratings peer review, the ratings of the Midsize Niche North American Life Insurers peer group are driven by their differentiated business profiles.
In the case of Reinsurance Group of America’s (RGA), Fitch sees its differentiated business profile favourably, thanks to its entrenched market position and long track record in the global reinsurance market.
Conversely, Fortitude Group Holdings, LLC; Security Life of Denver Insurance Company (SLD); Resolution Re Ltd.; Wilton Re Ltd.; and Talcott Financial Group, Ltd. are primarily focused on acquiring runoff insurance blocks.
Wilton Re has a long track record in the runoff market, with demonstrated pricing expertise acquiring mortality, longevity and morbidity risk. Fortitude Re was spun off from American International Group, Inc. in 2020, and has since grown through acquisitions of runoff life insurance, annuities and property/casualty business.
Resolution Life Group Holdings Ltd. has a track record of successfully acquiring runoff blocks, and SLD represents its US platform, while Resolution Re Ltd. is domiciled in Bermuda.
Talcott, a newer entrant has been active in the market as it has completed seven transactions and acquired over $50 billion in liabilities since 2021.
According to Fitch RGA’s Positive Outlook reflects business profile improvement as the largest provider of individual and group life reinsurance in North America. Moreover, its underwriting experience improved materially in 2022; with the impact of Covid-19 lessened.
Additionally, the rating agency views Carlyle and Blackstone’s origination capabilities and expertise favourably as they support and provide capital to Fortitude Re and Resolution Life, respectively.
The Carlyle Group owns approximately 13.5% of Fortitude Re and manages a significant proportion of its assets, in addition to providing advisory services. In October2022, Blackstone Inc. and Resolution Life announced a strategic partnership, including a $3 billion equity capital raise, inclusive of a $500 million strategic investment from Blackstone.
Despite rating agency seeing this favourably, it said that it will continue to monitor the portfolios for increases in risk that make it more exposed to potential credit losses or market volatility.
In July 2021, Sixth Street completed the acquisition of Talcott, which utilises an open-architecture multi manager platform, analysts added.
Fitch expects the peer group to continue to pursue opportunistic growth domestically and abroad, it stated. Fortitude Re and RGA recently completed reinsurance transactions of whole life insurance in Japan. In June 2022, Resolution Re reinsured $1.5 billion of whole life reserves in Japan.
