Fitch affirms Wilton Re ratings


Fitch Ratings has affirmed the 'A+' Insurer Financial Strength (IFS) ratings of Wilton Reassurance Company (WRAC), Wilton Reinsurance Bermuda, Wilton Reassurance Life Company of New York, Texas Life Insurance Company and Wilco Life Insurance Company, as well as ivari.

Fitch has also affirmed Wilton Re's Long-Term Issuer Default Rating at 'A-'. The rating outlook is stable.

According to Fitch the rating action follows the announcement that Wilton Re plans to reinsure a block of long-term care business from an indirect subsidiary of CNO Financial Group. WRAC will assume $2.7 billion of long-term care reserves from Bankers Life & Casualty Company via 100 percent indemnity reinsurance on a full funds transfer basis and collateral "comfort" trust. WRAC will receive a $825 million negative ceding commission. The transaction is subject to regulatory approvals and is expected to close in the third quarter of 2018.

The affirmation of Wilton Re's ratings reflects the company's stand-alone credit profile and the favourable impact of its ownership by Canadian Pension Plan Investment Board. While Fitch views LTC insurance as one of the riskiest products sold by US life insurers, due to above-average underwriting and pricing risk, high reserve and capital requirements, and exposure to low interest rates, which will increase Wilton Re's risk profile, Fitch believes the CNO business to be acquired has a better credit profile than the LTC business generally.

Fitch believes this transaction, along with others recently completed and contemplated, reflects Wilton Re's expanding risk appetite, which is partially offset by diversification benefits. Previously, Fitch considered Wilton Re's stand-alone credit profile 'A', with one-notch uplift for ownership, and indicated the 'A+' rating would be maintained even if Wilton Re's stand-alone profile declined by one notch. Following the transaction, Fitch now considers the stand-alone credit profile 'A-'.

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