Moody's Investors Service has assigned an A2 insurance financial strength (IFS) rating to Global Atlantic Re (GA Re) and Global Atlantic Assurance Limited (GAAL) with a stable outlook on both entities. GA Re and GAAL are Bermuda reinsurers and affiliates of Global Atlantic (Fin) Company (senior notes Baa2 stable) and its operating companies, including Commonwealth Annuity and Life Insurance Company (IFS A2 stable).
Moody's evaluates GA Re and GAAL as part of the same analytic unit as Global Atlantic (Fin) Company and therefore has aligned GA Re and GAAL's IFS rating with that of Global Atlantic's other insurance company operating subsidiaries. The GAAP financials used in analysing Global Atlantic are consolidated and include the Bermuda reinsurers.
The A2 IFS ratings of GA Re and GAAL are based on Global Atlantic's improving business profile, reflecting its growing and increasingly diversified footprint in the life insurance industry. Global Atlantic's success in its retail insurance platform, especially fixed annuities, has been augmented by strong growth of its institutional business, including block, flow and pension risk transfer reinsurance, and funding agreement backed notes.
Moody's expects that Global Atlantic will maintain its strict focus on profitability and continue to generate consistently strong returns on capital while maintaining good capital levels. The rating agency noted that the company's strengths are tempered by the rapid expansion of the balance sheet, investment risk, as well as disintermediation risk and related ALM complexities.
The following factors could lead to an upgrade of the ratings: 1) profitable premium growth balanced between life insurance and annuities; 2) strong statutory capital generation that supports organic growth; 3) reduced investment losses under a stress scenario; and 4) financial and total leverage (excluding AOCI) of less than 20%.
Conversely, the following factors could lead to a downgrade of the ratings: 1) increased risk profile or growth appetite; 2) reduced profitability of Global Atlantic with ROC falling below 8% (consolidated GAAP); 3) a decline in the NAIC CAL RBC ratio to below 400%; 4) increased investment and ALM risk; and 5) adjusted financial leverage (excluding AOCI) consistently above 25% (consolidated GAAP).
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