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TMCNet:  Fitch Affirms Wilton Re's IFS Rating at 'A'; Outlook Stable

[January 06, 2014]

Fitch Affirms Wilton Re's IFS Rating at 'A'; Outlook Stable

CHICAGO --(Business Wire)--

Fitch Ratings has affirmed at 'A' the Insurer Financial Strength (IFS) ratings of Wilton Reassurance Company, Wilton Reinsurance Bermuda Limited, Wilton Reassurance Life Company of New York and Texas Life Insurance Company (collectively referred to as Wilton Re). At the same time, Fitch has affirmed Wilton Re Holdings Limited's long-term Issuer Default Rating (IDR) at 'BBB+'. The Rating Outlook is Stable.

KEY RATING DRIVERS

The ratings are based on Wilton Re's consistently strong insurance earnings, balance sheet strength that includes solid capitalization across the operating subsidiaries, a conservative investment portfolio, ample liquidity and a reasonable amount of financial leverage. Additionally, Wilton Re is led by a team with extensive industry experience, which has helped allay Fitch's concerns about the company's relatively short operating history.

Fitch believes Wilton Re has taken a disciplined approach to growth reflective of the experience of the management team and the expectations of the company's investors. Fitch believes Wilton Re has prudently deployed capital only on transactions that have consistently met or exceeded its profitability hurdles. As a result, the company's operating performance to date has compared favorably to peers.

Also factored into the rationale is Wilton Re's strategic focus on U.S. life insurance where mortality risk and lapse risk are generally well understood and less correlated to financial market performance compared to annuity products. Wilton Re does not have exposure to variable annuities and more risky insurance products such as those with enhanced guarantees.

Fitch believes capitalization is strong across Wilton Re's operating subsidiaries. The company maintains risk-based capital levels in excess of Fitch's guidelines for the current rating category for U.S. operations. At Sept. 30, 2013 the RBC ratio of the U.S. subsidiaries was estimated at 465%. The company has approximately 35% of its business in Wilton Reinsurance Bermuda Limited. Accounting rules in Bermuda are less conservative than U.S. statutory accounting. Given these differences, Fitch looks at consolidated GAAP operating leverage to judge capital adequacy across the organization. Wilton Re's ratio was 5.6x at Sept. 30, 2013, a very strong result. Fitch views the company's financial leverage of approximately 17% as appropriate for the rating category.

Fitch views Wilton Re's investment portfolio as conservative and investment losses since the financial crisis have been minimal. Fixed-income securities comprised 94% of Wilton Re's invested assets at Sept. 30, 2013. The bond portfolio is high quality and liquid with 8% below investment-grade (BIG) securiies.


Fitch also believes that Wilton Re's liquidity position is sound. The company currently has cash and liquid assets to meet obligations at the holding company and operating company levels. Additional sources of liquidity include a senior revolving credit facility and as a member of the FHLB of Des Moines Wilton Re has access to additional borrowing capacity.

Offsetting these positives are execution risk associated with pricing and integrating acquired blocks of business particularly as the size of the transactions increases; concentration risk since a few large deals can drive overall operating performance or alter the composition of the company's overall book of business; and some uncertainty regarding the ultimate ownership structure of the company.

RATING SENSITIVITIES

Factors that could trigger a negative rating action include:

--A financial leverage increase above 25%;

--Large transactions outside the company's historical risk preference or expertise or any other material changes in risk appetite for the company;

--A sustained drop in the company's risk-adjusted capital position with no plans or ability to rectify;

--A decline in GAAP operating ROE below 10%;

--A change in regulation that would materially increase or change the company's current reserving, capitalization or redundant statutory reserve collateral requirements.

Factors that could trigger a positive rating action include:

--Improved scale and diversification of Wilton's Re core U.S. life business;

--Continued growth in profitability and successful execution of management plans and additional seasoning of the company's in-force book of business;

--Maintenance of capital levels at or above current levels on a risk-adjusted basis.

Fitch affirms the following ratings:

Wilton Reassurance Company

Wilton Reinsurance Bermuda Limited

Wilton Reassurance Life Company of New York

Texas Life Insurance Company

--IFS at 'A'; Outlook Stable.

Wilton Re Holdings Limited

--Long-term IDR at 'BBB+'; Outlook Stable.

Wilton Re Finance LLC

--5.875% Senior Notes due March 30, 2033 at 'BBB'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology', dated Nov. 13, 2013.

Applicable Criteria and Related Research:

Insurance Rating Methodology -- Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723072

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=813418

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.


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