AM Best upgrades credit ratings of Somerset Re on enhanced market position

AM Best has upgraded the credit ratings of Somerset Reinsurance Ltd. and Somerset Reinsurance Company (SRC), citing their balance sheet strength, adequate operating performance, and ability to execute their business plan.

The rating agency has upgraded the Financial Strength Ratings of Somerset Re and SRC to A from A-, and the Long-Term Issuer Credit Ratings to “a” from “a-”. The outlook for Somerset Re’s ratings has been revised to stable from positive, while the outlook for SRC’s ratings remains stable.

For those unaware, Somerset Re and SRC are focused on providing reinsurance solutions for asset-intensive life insurance and annuity business, including programs for new business flow and management of legacy blocks of life insurance and annuities.

AM Best said the upgrades reflect Somerset Re’s ability to execute on its business plan, including positive core earnings trends in profitability and premium growth and also reflect SRC’s support of the overall business plan.

The rating agency added, “Somerset Re’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), is expected to remain at the strongest level.

“Liquidity is assessed as more than adequate to fund anticipated short-term obligations of the current blocks of business held on the company’s balance sheet.

“Furthermore, Somerset Re continues to enhance its position in its markets of operation as it continues to execute reinsurance agreements each year with known rated insurers in line with the company’s business plan. Experience-related metrics are showing strong evidence of prudent pricing and investment management discipline.”

AM Best said that it anticipates capital infusions to continue that will support further new business growth over the intermediate term without the need to access additional funding. The companies are reportedly backed by an experienced reinsurance management team with deep ties to the industry.