Fitch Ratings has upgraded Fortitude Re’s ratings, citing an improved company profile that has strengthened in recent years through a series of strategic transactions, including reinsurance deals that have expanded the company’s scale and diversified its risk exposure.
The rating agency has also upgraded the Issuer Default Ratings (IDRs) for FRL’s holding companies: Fortitude Group Holdings, LLC (FGH) and FGH Parent, L.P. (collectively known as Fortitude Re) to ‘BBB+’ from ‘BBB’. The rating outlook is stable.
Adding more on the enhancements made through the aforementioned reinsurance deals, Fitch said, ” Since its sale from AIG to a group of investors in 2020, Fortitude Re has closed 19 transactions, including its $3.4 billion LTC and IDI transaction with Unum Group and its $4 billion annuity reinsurance agreement with Taiyo Life Insurance Company this year.
“Through these deals, it has acquired more than $100 billion in total reserves across Bermuda, the U.S., and Asia. It currently holds 10% global market share in the block reinsurance market, with approximately 26% and 10% market share in Asia and North America, respectively.”
The rating agency continued, “To date, Fortitude Re’s reinsurance blocks have largely performed in line with Fortitude Re’s pricing assumptions and expectations.
“This includes its 2023 transaction with Lincoln National Life Insurance Company, in which it assumed $28 billion of life insurance and annuity reserves.
“Its 2023 transaction with Prudential Financial Inc., in which it assumed $31 billion of legacy variable annuities, is also performing.”
According to Fitch, Fortitude Re has material scale, including a mix of life insurance, annuities and property/casualty business assumed from AIG at its inception.
Fitch therefore expects the firm to continue to grow, including through block acquisitions focused on life insurance and annuities in the U.S. and Japan.
The rating agency also expects Fortitude Re to continue growing through flow reinsurance transactions, as well as through funding-agreement-backed note issuances, which adds more predictability to earnings.
Other key drivers behind the ratings improvement include Fortitude Re’s supportive and robust capitalisation, its effective hedging practices, and the advantages gained from its private-equity ownership.
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