Fortitude Re’s ratings outlook upgraded

Bermuda-based hybrid re/insurer Fortitude Re has had its rating outlook upgraded to positive from stable by Fitch Ratings, which cited the company’s growth in the US and Japan. 

Fitch also affirmed the company’s BBB+ insurer financial strength rating, 

“The positive outlook reflects Fitch's view of Fortitude's improving company profile supported by growth and enhanced diversification across liabilities and geographies while maintaining its strong balance sheet,” Fitch said. “Further, Fitch expects earnings improvement, benefitting from higher reinvestment rates through portfolio repositioning.”

Fitch said its view of Fortitude, which primarily operates in the long term re/insurance sector, has historically been constrained by its company profile. 

“Fortitude continues to expand through acquisitions, including FRL's 4Q23 assumption of $28 billion of life insurance and annuity reserves from The Lincoln National Life Insurance Company,” Fitch said. “To date, the performance of the block has been in line with pricing assumptions.

“Fortitude 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.”

Fitch said Fortitude had completed 14 transactions, valued at more than $100 billion in total reserves, since being bought by Carlyle and T&D Holdings in 2020. 

“In 2022, Fortitude completed its largest deal since inception, assuming $31 billion of legacy variable annuities  from Prudential Financial, the agency said. “Fortitude revised its hedging strategy for the block, which has reduced potential volatility but also potential upside for the deal.

Fitch said it expected the company to continue to grow including through block acquisitions focused on life insurance and annuities in the US and Japan. However, the market is highly competitive, and block transactions are episodic by nature.

“Fitch also expects Fortitude to continue growing through flow reinsurance transactions, which add more predictability to flows. Fitch would view favourably continued generation of sustainable growth through profitable transactions while successfully running off existing liabilities.”

Fitch noted that Carlyle had shown an appetite to support growth at Fortitude and has participated in a $2 billion capital raise in 2022. 

Did you get value from this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.