777 Re credit ratings downgraded further – what happened?

Company explains that it is working with a regulator to address concerns

777 Re credit ratings downgraded further – what happened?


By Kenneth Araullo

AM Best has adjusted the financial ratings of 777 Re, a Bermuda-based reinsurance company, signaling concerns over its financial stability and risk management practices.

The agency downgraded the financial strength rating to C- (Weak) from B (Fair) and the long-term issuer credit rating to “ccc-” (Weak) from “bb” (Fair). Furthermore, AM Best has opted to continue the ‘under review’ status with negative implications for these ratings.

This decision reflects AM Best’s assessment of 777 Re’s balance sheet as very weak, combined with its marginal operating performance, limited business scope, and alleged inadequate enterprise risk management capabilities.

A key factor in the downgrade is the company’s significant investment in less liquid affiliated assets, which has adversely affected its balance sheet strength. This issue, along with adjustments to its operating performance and business profile evaluations, points to challenges in generating new business and managing existing liabilities.

777 Re noted that it is actively engaged with the Bermuda Regulatory Authority to address these concerns, specifically aiming to diminish its reliance on affiliated investments that have significantly impacted its risk-adjusted capitalization.

The company’s risk management strategies have been highlighted as a particular area of concern, especially given the substantial increase in affiliated assets year over year. AM Best anticipates maintaining the ratings under review with negative implications until 777 Re effectively revises its asset portfolio and aligns its risk management practices with the agency’s standards.

The company is also notably in hot water over a proposed £500 million (approximately $631 million) acquisition of Premier League club Everton FC, a deal which is reportedly fraught with regulatory issues.

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