financial strength rating of Bermuda-based Annuity and Life Reassurance Ltd., citing the company's "progress in implementing its business plan, superior capitalisation, financial flexibility and conservative approach to underwriting''.

But these advantages, it said, were offset partly by the challenges the company faced in the competitive and consolidating global reinsurance market.

"Annuity and Life continues to solidify its position and achieve consistent increases in sales and earnings by concentrating on two lines of business, life reinsurance and annuity reinsurance,'' stated an A.M. Best release.

The ratings agency said it expected the company to generate "consistent operating returns and avoid single company concentrations in its client base, while building scale and leveraging its low-cost structure in Bermuda's favourable tax and regulatory environment''.

A.M. Best added that Annuity and Life Re's capitalisation provided financial strength and flexibility and was supported by a prudent investment management strategy. The ratings agency expects the company to continue to deploy capital effectively and remain free of debt for the near-term. As of June 30, Annuity and Life reported assets of approximately $2.1 billion.

But the ratings agency said the company's needs to diversify its insurance liabilities could place pressure on premium rates and margins. The release also said volatility in interest rates, stock prices or economic conditions could interfere with results.