A.M. Best Affirms Ratings of Wilton Re
OLDWICK, N.J., FEBRUARY 08, 2006 - A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit
rating of "a-" of Wilton Reinsurance Bermuda Limited (Hamilton, Bermuda) and Wilton
Reassurance Company (Minneapolis, MN) (together known as Wilton Re). All ratings
have a stable outlook.
The rating affirmations follow Wilton Re's announcement of its intent to reinsure
approximately one-half of the life and annuity business of JPMorgan Chase & Co. [NYSE:
JPM], which is being acquired by Protective Life Corporation (Protective) [NYSE: PL]
(Birmingham, AL). (See related February 8, 2006 press release on Protective.) The
primary business includes over 1.2 million policies, mainly guaranteed level term,
traditional fixed and 403(b) variable annuities and universal life. The variable business is
expected to be reinsured with Goldman Sachs Risk Services. The proposed reinsurance
transaction would provide significant improvement in scale for Wilton Re and validation for
its business model. The closing of the transaction is expected in the third quarter of 2006.
Although Wilton Re has the current resources to assume the Chase business and
maintains a very strong risk-adjusted capital position, this transaction, along with Wilton
Re's other new business activities, deploys substantially all of its existing firm capital
commitments of $628 million. Thus, in order for Wilton Re to continue to execute its
planned strategy of block acquisitions and traditional life reinsurance business, additional
capital raising initiatives must be effected. Based on Wilton Re's execution of its business
plan during its first year of operations and the initial successful capital raise, A.M. Best fully
expects Wilton Re will raise the required capital needed to grow the company and achieve
greater scale and improved earnings. However, should Wilton Re be unsuccessful in its
capital raising initiatives, A.M. Best would reassess the current ratings.
Offsetting rating factors include the lack of operating history, the uncertainties surrounding
its planned capital raising initiatives and the execution risks inherent in any large
transaction. In addition, A.M Best believes the rate of growth of the U.S. life reinsurance
market has slowed, which may pressure Wilton Re's longer-term growth prospects.
For Best's Ratings, an overview of the rating process and rating methodologies, please
visit Best's Rating Center.
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companies, please visit Best's Reinsurance Center.
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