AM Best has affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” (Excellent) of Bermudian-based Aspida Life Re Ltd and Aspida Life Insurance Company of Durham, North Carolina, collectively referred to as Aspida Group.

The outlook of these credit ratings is stable.

The ratings reflect Aspida Group’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.

The ratings agency said: “The stable outlooks reflect the expectation that Aspida Group will maintain the strength of their balance sheet and overall liquidity sources with support from Ares Management Corporation and third-party investors as it executes its business strategy of reinsurance growth through block acquisitions and flow reinsurance treaties and retail growth through expanding its distribution partners and its competitive annuity product suite.

“The outlooks also reflect the maintenance of an appropriate enterprise risk management framework. Operating trends are expected to remain positive over the near to medium term as management continues to focus on interest rate spread management.”

AM Best added: “The very strong balance sheet strength assessment considers Aspida Group’s risk-adjusted capitalisation being at the strongest level, as measured by Best’s capital adequacy ratio, and AM Best’s expectation that Aspida Group will maintain similar levels of capital strength as the company executes its growth strategies.

“AM Best believes that Aspida Group will continue to benefit for the foreseeable future from significant capital infusions and financial resources of Ares and other investors.”

The agency said Aspida Group had profitable adjusted operating income in 2023 and expects to continue to grow its operating income steadily driven by notable premium growth in both of its operating entities for the foreseeable future.

It said Ares Insurance Solutions, a resource of Ares dedicated to Aspida Group, has repositioned and deployed assets, focusing on structured credit to increase interest rate spread and yield.

While AM Best acknowledges the favourable track record and extensive investment experience, exposure to less liquid investments in Aspida Group’s general accounts are somewhat elevated compared with industry averages. Over the longer term, AM Best said, it expects that Aspida Group will demonstrate increasing returns on capital.

In its neutral business profile assessment of Aspida Group, AM Best said, it recognises that both main operating entities are driving growth through their respective business plans and that Aspida Group is building a recognisable brand. Aspida Group does remain concentrated in interest-sensitive annuities, which currently account for all of its business.

AM Best said: “Aspida Group benefits from a sound enterprise risk management approach with a well-developed framework and significant controls in place to mitigate risks. The company also conducts extensive stress testing as required by regulators.

“As with any newer organisation, Aspida Group face execution risks, which are magnified by the increasing competitive annuity market environment. AM Best will continue to monitor their ability to execute on their current business plans without any material adverse deviation from expected levels of capitalisation levels and earnings.”