S&P: Global Atlantic Financial Group Ratings Affirmed, Financial Risk Profile Revised To Moderately Strong; Outlook Stable
"GAFG has improved its capital to significantly above the 'BBB' level," said S&P Global Ratings credit analyst Elizabeth Campbell. "As a result, we have revised our assessment of the company's capital and earnings and financial risk profile to moderately strong from upper adequate. The company accomplished this by a recent debt issuance as well as through the active reduction of capital-intensive securities in its investment portfolio. We expect GAFG to produce returns on equity of more than 10%, although these could be pressured by net investment income compression from investment-recycling efforts and debt-related interest expense. We also expect financial leverage to remain below 30% and fixed-charge coverage to stay above 4x--both on a generally accepted accounting principles basis."
The rating reflects GAFG's diversified earnings across its annuity and life insurance new business platforms as it continues to execute its block acquisition reinsurance strategy. The group now operates its three business lines under a single brand with an integrated risk and investment management and governance structure. Our ratings continue to acknowledge the U. S. life insurance sector's low industry and country risk.
"The stable outlook reflects our expectation that GAFG will maintain its current platform and focus on U. S. life insurance, annuity, and life reinsurance markets," Ms. Campbell continued. "We expect the company to grow life and annuity earnings organically. We believe its focus on institutional distribution partners positions it comparatively well to meet new U. S. Dept. of Labor regulatory fiduciary standards. We also expect GAFG and its subsidiaries to maintain capital adequacy redundant significantly above the 'BBB' level over the next one to two years."
We may lower our ratings if the group's capital falls below the 'BBB' redundancy level and no longer supports the ratings. If operating performance weakens so that we no longer view its business risk profile as strong, or if there is a significant change to the combined group's overall risk profile, we may also lower our ratings.
"We may raise our ratings if the combined group increases capitalization to a very strong level and further develops its competitive position through continued profitable growth in its block acquisition business and new sales of annuity and life insurance products," Ms. Campbell added.
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