A Brookfield Reinsurance-owned Bermuda reinsurer can expect increased volatility in balance sheet metrics in the year ahead, according to ratings agency AM Best.

And while there are favourable attributes of North End Re Ltd, it operates in a highly competitive business and suffered recent investment losses.

AM Best affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” (Excellent) of North End Re, with a stable outlook.

The ratings reflect North End’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.

Best said: “North End’s risk-adjusted capitalisation is considered favourable, as measured by Best’s Capital Adequacy Ratio.

“However, it is noted that volatility in balance sheet metrics is likely, once more business is assumed, which is expected in the latter half of 2024.

“As operations ramp up, the company also is expected to utilise available internal and external revolving lines of credit to provide liquidity and maintain capital levels.

“To date, North End Re Ltd has closed one transaction in third-quarter 2021, reinsuring $1.6 billion of fixed deferred annuities.

“North End’s parent, Brookfield Reinsurance Ltd, is a publicly traded insurance and reinsurance company focused on providing capital-based solutions to insurance companies.

“Brookfield Reinsurance seeks capital-intensive business to leverage its asset management and sourcing capabilities, acquiring American National Group, Inc in an all-cash transaction valued at approximately $5.1 billion in 2022.

“North End Re Ltd geographically complements its sister companies, North End Re (Cayman) SPC, and Brookfield Annuity Company, which provides pension risk transfer solutions in Canada.”

But Best said that slightly offsetting the favourable attributes of North End Re and its greater organisation are the high level of competition and the temporary realised investment losses caused by rising interest rates, which has impacted earnings negatively over the past two years.

AM Best notes that: “While rising interest rates have caused losses to date, the enhanced yield in the company’s investments will be a favourable factor over the longer term.

“Furthermore, while the lack of new transactions in 2022 and 2023 have exemplified the competitive space North End Re Ltd. operates in, AM Best notes that the company was initially quick in establishing itself in the market, showing early success against competitors.”