OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Long-Term Issue Credit Rating (Long-Term IR) of “a+” on the initial $1.2 billion ($905 million outstanding as of Dec. 31, 2017) of 5.75% Secured Notes (notes), due Dec. 31, 2058, issued by Redding Funding Ltd. (Redding Funding) (Nova Scotia, Canada), a wholly owned subsidiary of Wilton Re Ltd (WRL). The outlook of this Credit Rating (rating) is stable.
The notes were part of a transaction used to fund statutory reserve requirements for a block of life insurance policies ceded by Wilton Reassurance Company to Redding Reassurance Company 2, a South Carolina-domiciled special purpose financial captive insurance company. As the statutory reserve requirements are reduced, the amount of the corresponding notes also will be reduced.
At time of the issuance of the notes, the Canada Pension Plan Investment Board, the parent of WRL, contributed $1.2 billion to WRL, which in turn contributed the amount to Redding Funding to collateralize the notes. The collateral is to be invested under specific investment guidelines. In addition, the notes are guaranteed by WRL; this guaranty is subordinated to all senior debt of WRL.
The rating affirmation represents A.M. Best’s current opinion as to the issuer’s ability to meet its financial obligations to the noteholders when due. The rating takes into consideration primarily the following: the notes issued are collateralized by a pool of invested assets, which as of Dec. 31, 2017, other than a small amount in a money market fund, were entirely invested in U.S. Treasuries; the potential losses of the collateral portfolio due to defaults and lack of marketability of the investments over the notes legal maturity period; and the support provided by WRL as guarantor of Redding Funding’s payment obligations.
The Long-Term IR could be upgraded or downgraded and/or the outlook revised if material changes occur in the credit ratings of the underlying collateral or the Long-Term Issuer Credit Rating of the guarantor.
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