AM Best has affirmed the financial strength rating (FSR) of A+ (Superior) and the long-term issuer credit ratings (Long-Term ICR) of “aa-” (Superior) for the life/health insurance and annuity subsidiaries of Wilton Re Ltd (WRL) (Nova Scotia, Canada), collectively known as Wilton Re.
The ratings for Wilton Re Ltd itself were also affirmed, with a Long-Term ICR of “a-” (Excellent). All ratings carry a stable outlook.
AM Best cited implicit support from Wilton Re’s ultimate parent company, Canada Pension Plan Investments Board (CPP Investments), as a factor in the rating affirmations.
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CPP Investments manages approximately CA$632 billion in net assets as of March 31, 2024, and serves around 22 million Canadian pensioners. Wilton Re plays a strategic role within CPP Investments, contributing to the growth of assets under management and diversifying cash flows, which support the pension fund's obligations.
The broader CPP Investments organization benefits from balancing biometric and investment risks across its portfolio, it was suggested.
Since its founding in 2005, Wilton Re has grown its capital and invested assets through a combination of assumed reinsurance treaties and acquisitions of closed blocks of life, health, and annuity business. This growth strategy has been financed through earnings, debt issuance, and capital contributions from CPP Investments.
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Although CPP Investments is not obligated to provide financial support, it may choose to do so to maintain Wilton Re’s risk-adjusted capital levels.
Wilton Re’s capital accumulation has largely been driven by favorable operating gains, though there can be year-to-year fluctuations due to new deals and dividend payments. The company’s statutory capital growth is moderated by the long-term nature of its business, as claims are expected to be offset by net investment income, reserve releases, and earned premiums from its portfolio of in-force blocks.
One area of concern highlighted by AM Best involves Wilton Re’s exposure to higher-risk products, such as guaranteed universal life (GUL) policies. The incremental business from Prudential Financial Inc., announced in 2024, will add some concentration risk to Wilton Re’s GUL exposure.
However, the company has prior experience managing this type of product, following transactions in 2021 and 2023. Wilton Re’s continued performance will depend on factors such as ceding commissions, the market value of transferred assets, and asset allocation strategies aimed at boosting yields.
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