Fitch Ratings has downgraded Wilton Re’s Insurer Financial Strength (IFS) ratings amidst revision in ownership uplift.
Wilton Re’s IFS rating has been downgraded to ‘A’ from ‘A+’. Fitch has also downgraded Wilton Re’s Long-Term Issuer Default Rating (IDR) to ‘BBB+’ from ‘A-‘. The rating outlook is stable.
The downgrade reflects a revision in ownership uplift from Fitch’s view of Wilton Re’s standalone credit quality to one notch from two notches due to Wilton Re’s ownership by CPP Investments. The revision in ownership uplift more closely aligns with Fitch’s treatment of other insurers owned by non-insurance entities, along with other Fitch-rated entities owned by CPP Investments.
The uplift acknowledges Wilton Re as a non-core subsidiary, but an important investment platform for CPP Investments, and considers the defined linkage to CPP Investments because of Wilton Re’s debt, including change of control provisions.
The uplift recognizes the benefit that CPP Investments provides to Wilton Re’s financial flexibility. although, given its excess capital position compared to target levels, Wilton Re has returned capital to CPP Investments.
Fitch states Wilton Re’s ratings continue to reflect its moderate business profile and strong capitalization, believing that Wilton Re’s business profile reflects its strong presence in the administrative reinsurance market.
In recent years, the company’s capitalization and financial results have generally been strong and in line with rating expectations. However, investment risk has increased materially as part of an updated strategic asset allocation. Fitch expects it to increase further over the rating horizon.
Fitch ranks Wilton Re’s business profile as moderate compared to all other life insurance companies, which considers its experience and strong position in acquiring runoff blocks and moderate diversification. Given this ranking, Fitch scores Wilton Re’s business profile ‘a-‘ under its credit factor scoring guidelines. While the company is smaller than most peers, it possesses a strong competitive position and solid track record in its core market of acquiring runoff blocks.
