AM Best has affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit ratings of “a-” (Excellent) of Bermudian-based Athora Life Re Ltd and its subsidiary, Athora Ireland plc.

The outlook of these credit ratings is stable.

The ratings reflect Athora Re’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The ratings also benefit from enhancement owing to the support of Athora Re’s parent company, Athora Holding Ltd.

In AM Best’s view, Athora Re is strategically important to the group as a vehicle for centralising capital and providing a platform for Athora’s external reinsurance offering.

The ratings of Athora Ireland reflect its strategic importance to Athora Re as a European Union-domiciled vehicle for writing reinsurance business.

Athora Re’s risk-adjusted capitalisation, as measured by Best’s capital adequacy ratio, was at a very strong level for year-end 2020 and is expected to be maintained at this level.

Forecast business growth and the rollout of the company’s strategic asset allocation drive increasing capital requirements. However, the company’s risk-adjusted capitalisation is expected to be supported by capital injections and internal economic capital generation.

Credit for long-term economic capital forms a material component of Athora Re’s forecast available capital.

Athora Re’s balance sheet strength assessment considers its sophisticated asset-liability management, which is necessary to manage interest-rate risk arising on its target life insurance liabilities and credit risk on its private credit portfolio.

The company manages its interest-rate risk by targeting a close-to-zero duration gap, and credit risk is partially mitigated by the significant private credit experience of Apollo Global Management Inc, with which the company has a strategic relationship.

AM Best said an offsetting rating factor is material uncertainty surrounding the scale, timing and commercial terms of future reinsurance transactions.

Athora Re has mainly executed internal reinsurance business with Athora group subsidiaries to date, although the company has completed an external pension risk transfer transaction.

The agency said Athora Re’s profitability is not expected to meet its ambitious longer-term targets until it builds scale and applies its target strategic asset allocation to assets acquired through new reinsurance transactions.