OLDWICK, N.J.–(BUSINESS WIRE)– A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit ratings of “a-” of Commonwealth Annuity and Life Insurance Company (Commonwealth) and its subsidiary, First Allmerica Financial Life Insurance Company (FAFLIC) (both domiciled in Southborough, MA), and Columbia Capital Life Reinsurance Company (Columbia) and its subsidiary, Charleston Capital Reinsurance LLC (Charleston) (both domiciled in Washington, DC). The outlook for all ratings is stable. Commonwealth and its affiliates are ultimately wholly owned subsidiaries of The Goldman Sachs Group, Inc. (Goldman Sachs).
Commonwealth reinsures universal life, variable universal life and other types of policies, while FAFLIC reinsures traditional life, payout annuities and other types of policies. The entire book of business at Columbia and Charleston is currently comprised of blocks retroceded from Commonwealth.
The ratings recognize the consolidated solid risk-adjusted capitalization of the Goldman Sachs life reinsurance companies, the history of GAAP earnings (despite fluctuating statutory results) and strong liquidity. The ratings also consider A.M. Best’s expectation that the reinsurance group has access to capital, hedging expertise, deal flow and other Goldman Sachs resources, as needed. Commonwealth also has improved its risk profile by ceding its variable annuity business to a Bermuda affiliate.
Despite these positive attributes, A.M. Best believes the reinsurance group may encounter challenges in achieving meaningful scale efficiencies given the highly competitive nature of the life reinsurance market, which is dominated by companies with well established life reinsurance franchises. If additional blocks cannot be acquired at the expected pace, Commonwealth may not grow into the scale required to generate consistent and strong statutory profits. An additional challenge includes achieving favorable market investment portfolio performance in the current difficult economic climate.
The principal methodology used in determining these ratings is Best’s Credit Rating Methodology — Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Update to BCAR for Life & Health Insurers”; “Rating Members of Insurance Groups”; and “Assessing Country Risk.” Methodologies can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.
