KBRA Assigns Preliminary Rating to Knighthead Annuity & Life Assurance Company's Prescribed Capital Notes

NEW YORK--(BUSINESS WIRE)--KBRA assigns a BBB+ preliminary long term credit rating for up to $100 million of twenty-year prescribed capital notes (Notes) to be issued by Knighthead Annuity & Life Assurance Company (KHAL). The Outlook for the preliminary rating is Stable.

Key Credit Considerations

KHAL plans to use the proceeds from the issuance for general corporate purposes, including assumption of additional reinsurance and M&A. KHAL’s capitalization strengthened meaningfully in 2025, supported by retained earnings and capital contributions. The Notes are expected to further enhance regulatory and financial flexibility. KBRA's pro forma prescribed capital note leverage remains manageable under KBRA’s $100 million issuance assumption and pro forma debt service coverage remains strong under both earnings-based and conservative cash-based measures. Subject to prior approval of the Cayman Islands Monetary Authority (CIMA), KHAL has paid all required interest on its current outstanding prescribed capital notes since issuance in October 2022. The Notes are deeply subordinated to policyholders, claimants, beneficiaries, and other creditors, rank pari passu with existing and future prescribed capital notes issued by KHAL, and require CIMA approval for interest, principal, and redemption payments.

Balancing these strengths are the CIMA approval and deferral mechanics which create payment-timing uncertainty for noteholders. KHAL’s investment strategy has produced strong long-term returns and materially supported earnings, but the general account includes a meaningful allocation to less liquid and higher-risk assets. While this is consistent with KHAL’s long-short total-return investment strategy and is supported by risk management and valuation controls, it remains a key source of earnings and capital volatility, particularly under adverse market conditions. KHAL remains concentrated in fixed annuity business, with earnings and spread performance driven primarily by MYGA/FIA-related direct and assumed business and investment spread management. Product concentration and reliance on investment performance remain constraining credit factors, notwithstanding growing distribution capabilities and strategic expansion into additional jurisdictions and platforms.

Rating Sensitivities

An upgrade of KHAL's insurance financial strength rating (IFSR) could result in positive rating action, while a downgrade in KHAL's IFSR could result in negative rating action.

To access ratings and relevant documents, click here.

Recent Publications

• Private Credit: Much Ado About Nothing—Perspectives on Columbia Business School Paper About Private Ratings
• Private Credit: A More Balanced Review of the NAIC PLR Review Process for Insurance Balance Sheets
• Unpublished Ratings: Same Standards, Different Distribution
• Private Credit: From Acquisitions to Partnerships—Asset Managers’ Growing Role With Life/Annuity Insurers
• 2026 Global Life Reinsurance Sector Outlook: Cautious Optimism as Asset-Intensive Sector Enters Its Next Phase

Methodology

• Insurance: Insurer & Insurance Holding Company Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1015626