S&P downgrades Vantage following Howard Hughes acquisition

S&P Global Ratings has downgraded Vantage Group Holdings and its core insurance subsidiaries following the company’s acquisition by Howard Hughes Holdings, citing the lower credit quality of its new parent rather than any deterioration in the insurer’s operating performance.

S&P has lowered its long-term issuer credit rating on Vantage Group Holdings to BB from BBB-, while the long-term issuer credit and financial strength ratings of its core insurance subsidiaries — Vantage Risk, Vantage Risk Specialty Insurance and Vantage Risk Assurance — were reduced to BBB from A-. 

The ratings were subsequently withdrawn at the company’s request. At the time of withdrawal, the outlook was stable.

The downgrade follows Vantage’s acquisition by Howard Hughes Holdings (HHH), which carries a BB+ rating. S&P said the newly formed group, which combines Vantage with the highly leveraged real estate business, has a group credit profile of bb+.

Houston-based HHH has stated its intention to become a diversified holding company. The company is 47% owned by Pershing Square, which will manage Vantage's investment portfolio under a broader services agreement with HHH.

S&P views Vantage as strategically important to HHH and applies two notches of insulation between the parent and the insurer's operating subsidiaries.

Since launching underwriting operations in 2021, Vantage has expanded its business and S&P expects earnings to strengthen through 2028. The insurer has also acquired two Delaware-regulated shell insurance entities to support growth in the US specialty market.

Comparatively, AM Best has removed from under review with developing implications and affirmed the financial strength rating of A-, and the long-term issuer credit ratings of a- of Vantage Risk (Bermuda) and its affiliates, citing very strong balance sheet strength and adequate operating performance post acquisition. 

AM Best said this decision reflects an expectation that over the near term, the group will continue to expand its presence in the specialty and reinsurance markets and execute its business plans post-acquisition.

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