AM Best Affirms Issue Credit Ratings of Weston2038 LLC’s Credit-Linked Notes
June 20 2024 - 3:28PM
Business Wire
AM Best has affirmed the Long-Term Issue Credit Rating
(Long-Term IR) of “a” (Excellent) on the $846 million (of which
$487 million is currently outstanding as of March 31, 2024), 6.00%
Series Hannover, No. 1 variable funding credit-linked note (Block 1
CLN), due July 1, 2038, issued by Weston2038 LLC (Weston2038), a
Delaware limited liability company (issuer). Concurrently, AM Best
has affirmed the Long-Term IR of “a” (Excellent) on the $433
million (of which $476 million is currently outstanding as of March
31, 2024), 6.00% Series Hannover, No. 2 variable funding
credit-linked note (Block 2 CLN), due July 1, 2043, also issued by
Weston2038. The outlook of these Credit Ratings (ratings) is
stable.
Both the Block 1 CLN and Block 2 CLN are each in consideration
of a variable funding surplus note (VSN) issued by Redding
Reassurance Company 3 LLC (Redding Re 3), a Missouri-domiciled
special purpose financial captive reinsurer and a direct wholly
owned subsidiary of Wilton Reassurance Company (Wilton
Reassurance). Each VSN supports the excess reserves for a block of
life insurance business retroceded by Wilton Reassurance to Redding
Re 3 and has a face amount equivalent to that excess reserve
balance, which is also equivalent to the face amount of the
corresponding credit-linked note for which the VSN is exchanged.
For the Block 1 CLN transaction, Wilton Reassurance retrocedes a
specified block of level term and universal life secondary guaranty
business policies on a coinsurance basis to Redding Re 3. For the
Block 2 CLN transaction, Wilton Reassurance retrocedes a specified
block of universal life secondary guaranty business policies on a
coinsurance funds withheld basis to Redding Re 3.
The VSN and corresponding credit-linked note for the Block 1 CLN
and Block 2 CLN have the same interest rate. Concurrent with the
issuance of the credit-linked notes, Weston2038 entered into risk
transfer agreements (i.e., cash-settled ISDA swap) with Hannover
Life Reassurance Company of America (Bermuda) Ltd. to provide
liquidity for any redemption/monetization of the credit-linked
notes.
As of December 2023, statutory reserves, economic reserves and
excess reserves of the underlying life insurance business
pertaining to the Block 1 CLN and Block 2 CLN were in line with the
projected results.
The rating action represents AM Best’s current opinion as to the
issuer’s ability to meet its financial obligations to the
noteholders when due. The ratings primarily take into consideration
the following: Hannover Life Reassurance Company of America
(Bermuda) Ltd.’s Long-Term Issuer Credit Rating of “aa” (Superior)
as the swap counterparty to Weston2038; netting arrangements among
transaction parties; no reserves or funds at Weston2038, except
reliance on funds provided by Redding Re 3; and potential legal
risks as it relates to enforceability of the various transaction
agreements.
The Long-Term IR could be upgraded or downgraded, or the outlook
revised if material changes occur in the financial condition and
ratings of Hannover Life Reassurance Company of America (Bermuda)
Ltd. or Wilton Reassurance.
This press release relates to Credit Ratings that have been
published on AM Best’s website. For all rating information relating
to the release and pertinent disclosures, including details of the
office responsible for issuing each of the individual ratings
referenced in this release, please see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please
view Guide to Best's Credit Ratings. For information
on the proper use of Best’s Credit Ratings, Best’s Performance
Assessments, Best’s Preliminary Credit Assessments and AM Best
press releases, please view Guide to Proper Use of Best’s
Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance
industry. Headquartered in the United States, the company does
business in over 100 countries with regional offices in London,
Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more
information, visit www.ambest.com.
Copyright © 2024 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240620640830/en/
Matt Tuite Associate Director +1 908 882
2403 matt.tuite@ambest.com
Wai Tang Senior Director +1 908 882 2388
wai.tang@ambest.com
Christopher Sharkey Associate Director, Public
Relations +1 908 882 2310
christopher.sharkey@ambest.com
Al Slavin Senior Public Relations Specialist +1
908 882 2318 al.slavin@ambest.com