AM Best has assigned a financial strength rating of A- (Excellent) and a long-term issuer credit rating of “A-” (Excellent) to recently established Bermudian-based reinsurer Sutton Life Re Ltd.

The outlook assigned to these credit ratings is stable.

The agency said the ratings reflected Sutton Life Re’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

Sutton Life Re is affiliated with Sixth Street Partners LCC, a global investment firm that has committed significant capital into the life/annuity insurance space over the past year, AM Best said.

On December 3, Allianz Life Insurance Company of North America announced reinsurance agreements with Resolution Life Group Holdings LP and Talcott Resolution Life Insurance Company, the latter of which is affiliated with Sixth Street and Sutton Life Re.

Under the terms of the transaction, AM Best said, approximately $20 billion of fixed-indexed annuity liabilities were placed with Talcott and Sutton Life Re. The transaction formally closed at year-end 2021, resulting in Talcott and Sutton Life Re managing $111 billion in liabilities and surplus.

AM Best evaluated Sutton Life Re’s balance sheet and projected operating results, and concluded that the entity has a very strong balance sheet with expected adequate operating performance.

Results from Best’s capital adequacy ratio post-transaction show the balance sheet at the assessed level of strongest, due in part to relatively conservative initial investment allocations.

Furthermore, Sutton Life Re will utilise resources and already established policies and procedures from Talcott for investment management and for its enterprise risk management framework.

AM Best anticipates that Sutton Life Re will engage in future transaction activity as it executes its strategy of engaging in reinsurance flow transactions and block acquisitions.

Despite these favourable assessments, AM Best notes that as with any projection, actual results may vary substantially leading to different outcomes.

AM Best will continue to monitor the evolution of asset holdings as the portfolio is redeployed over time to target allocations.

The agency said confidence in projections was bolstered by experienced management teams at Sutton Life Re and its immediate holding company, and the availability of support from affiliates in the organisation.