October 25, 2017 / 7:05 PM / a year ago

Fitch Publishes 'A' IFS for Global Atlantic Financial Group's Life Insurance Subs; Outlook Stable

(The following statement was released by the rating agency) NEW YORK, October 25 (Fitch) Fitch Ratings has published Insurer Financial Strength (IFS) ratings of 'A' (Strong) for the life insurance operating subsidiaries of Global Atlantic Financial Group (GAFG). At the same time, Fitch has assigned a 'BBB+' Issuer Default Rating (IDR) to Global Atlantic (Fin) Company (Finco) and to Commonwealth Re Midco Limited (Midco). Fitch has also affirmed the IDR of Global Atlantic Financial Life Limited (GAFLL) at 'BBB+'/Stable Outlook. Fitch has chosen to withdraw the rating at GAFLL for commercial reasons. The Rating Outlook is Stable. A full list of rating actions follows at the end of this release. KEY RATING DRIVERS The published 'A' IFS ratings of GAFG's primary life insurance subsidiaries reflect their status as Core operating companies within the GAFG organization, and are rated based on a group credit profile per Fitch's criteria. All of the life insurance subsidiaries listed at the end of the release are considered core as the entities share common management, resources, and branding. With the exception of First Allmerica Financial Life Insurance Company (FAFLIC), the operating entities write new retail and block reinsurance business. FAFLIC is considered core as it is used by GAFG to retain New York business in block reinsurance transactions and also has reinsurance agreements where it assumes and cedes business internally with other GAFG affiliates, which bolsters the group's willingness to support FAFLIC. The 'BBB+' IDR assigned to Finco and Midco aligns with GAFLL's IDR and reflects standard notching between the implied insurance operating company and holding company IDRs for a ring-fenced regulatory environment based on Fitch's criteria. Finco is the intermediate holding company that directly owns GAFG's U.S life insurance subsidiaries. Midco is directly owned by GAFLL and is the intermediate holding company that directly owns Finco and Global Atlantic Re Limited, GAFG's Bermuda life insurance subsidiary. GAFG's ratings reflect a sustained improvement in the company's business profile over the last few years given the company's successful execution of both Forethought and Accordia acquisitions as well as continued strong capitalization and sustained strong operating performance subsequent to the acquisitions. The rating also reflects the challenging operating environment due to ongoing low rates and competitive challenges in its core markets. RATING SENSITIVITIES The key rating sensitivities that could result in a rating upgrade include: --Improved and diversified business profile demonstrated by consistent earnings and revenue contributions by business segments; --Achieve very strong capitalization and leverage which includes RBC above 450%, a PRISM capital model score of 'Very Strong', and financial leverage below 25%; --GAAP fixed charge coverage above 10x on a sustained basis assuming a longer term debt profile consistent with peers; --Continued low credit related investment losses. The key rating sensitivities that could result in a downgrade include: --A decline in capitalization and leverage which includes RBC below 375%, a PRISM capital model score at the low end of 'Strong', and financial leverage above 30%; --ROE declining to below 10% on a sustained basis; --Decline in GAAP fixed charge coverage ratio below 6x. FULL LIST OF RATING ACTIONS Fitch publishes the following ratings: Commonwealth Annuity and Life Insurance Company Forethought Life Insurance Company Accordia Life and Annuity Company First Allmerica Financial Life Insurance Company Global Atlantic Re Limited --IFS at 'A' Fitch assigns the following ratings: Global Atlantic (Fin) Company Commonwealth Re Midco Limited --Long-Term IDR at 'BBB+' Fitch affirms and withdraws the following rating: Global Atlantic Financial Life Limited --Long-Term IDR at 'BBB+'. The Rating Outlook is Stable. Contact: Primary Analyst Nelson Ma, CFA Director +1-212-908-0273 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Secondary Analyst Douglas Meyer, CFA Managing Director +1-312-368-2061 Committee Chairperson Mark Rouck, CPA, CFA Senior Director +1-312-368-2085 Media Relations: Benjamin Rippey, New York, Tel: +1 646 582 4588, Email: benjamin.rippey@fitchratings.com. 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