AM Best has assigned the Financial Strength Ratings of B++ (Good) and the Long-Term Issuer Credit Ratings of bbb+ to Athora Life Re Ltd. (Athora Re) (Bermuda) and Athora Ireland plc (Athora Ireland) (Ireland). The outlooks assigned to each of these Credit Ratings (ratings) are stable.
Athora Res ratings reflect its balance sheet strength, which AM Best categorises as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). Athora Irelands ratings reflect its balance sheet strength, which AM Best categorises as strong, as well as its adequate operating performance, limited business profile and appropriate ERM. The ratings also factor in their strategic importance to Athora Holding Ltd. (Athora). Athora Re and its subsidiary, Athora Ireland, are expected to provide third party and intra-group reinsurance, which are core features of Athoras business plans.
Athora Re is a Bermuda-based life reinsurer wholly owned by Athora, a company established in 2017 to provide acquisition and reinsurance solutions to European life insurers. Based on business plans, Athora Res risk-adjusted capitalisation is projected to be maintained at the very strong level, as measured by the Bests Capital Adequacy Ratio (BCAR), whilst Athora Irelands risk-adjusted capitalisation is projected to be maintained at the strongest level. The companies benefit from the financial flexibility of Athora, supported by circa EUR 1.5 billion of undrawn, committed and irrevocable capital from its shareholders. The companies also benefit from Athoras long-term relationships with its strategic shareholders (Athene Holding Ltd and Apollo), Athoras access to Apollos asset management expertise, and an experienced management team.
An offsetting rating factor is Athoras elevated level of investment risk associated with the ambitious targeted investment returns. AM Best views the investment risk to the group as related primarily to default experience rather than spread variability in light of the targeted low duration gap. A scenario of rising interest rates may increase risk in this respect. The early stage of the companys business plans means that executing a limited number of large transactions on reasonable terms is important to assembling the projected balance sheets of the group and its member companies. AM Best sees Athoras business plans as well-timed, and appropriately resourced in the context of a large target market of legacy life insurance portfolios in Europe.
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Operating performance in the early years of the business plan is not expected to meet the groups longer term return on equity (ROE) targets as the company builds scale and develops the asset allocation of investments. However, successful implementation of the business plan would lead to attractive ROEs. AM Best expects the companies operating performance to benefit over time from higher investment margins driven by investing a prudent proportion of assets in a diversified portfolio of less liquid assets.
Athora Re and Athora Irelands business profiles cover external reinsurance and intra group reinsurance. Both companies will typically focus on non-participating reinsurance structures. The use of intra group reinsurance is an essential component of Athoras business plans, which enables the centralisation of liabilities to assist with capital optimization within the group, and provides access to the Bermuda operating environment. Athora Ireland, as an EU-based risk carrier for intra group and external insurance, provides Athora with commercial and regulatory flexibility. AM Best expects the business profiles of Athora Re and Athora Ireland to be driven by the execution of Athoras business plans, including the acquisition of insurance companies by the group.
This press release relates to Credit Ratings that have been published on AM Bests website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Bests Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Bests Credit Ratings. For information on the proper media use of Bests Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Bests Credit Ratings and AM Best Rating Action Press Releases.
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