AM Best Affirms Credit Ratings of Knighthead Annuity & Life Assurance Company and Merit Life Insurance Co.

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Knighthead Annuity & Life Assurance Company (Knighthead Annuity) (Cayman Islands) and its affiliate Merit Life Insurance Co. (Merit) (Charlotte, NC) (collectively referred to as Knighthead Insurance Group). The outlook of these Credit Ratings (ratings) is stable. In addition, AM Best has a assigned a Long-Term Issue Credit Rating (Long-Term IR) of “bbb” (Good) to the newly issued $75 million, 8.5% surplus notes, due 2046, issued by Knighthead Annuity. The outlook assigned to this rating is stable. (See below for details of Knighthead Annuity’s existing Long-Term IR).

The ratings reflect Knighthead Insurance Group’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

Knighthead Insurance Group has the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which supports the group’s diverse asset allocations, along with the growth of its U.S. business. The group’s balance sheet strength is viewed as strong. Although Knighthead Annuity holds illiquid credit investments, including rated feeder funds, private loans and structured credit, which have generated strong historical returns, it also maintains high allocations to cash and public fixed-income instruments to provide sufficient liquidity. Access to additional financing through the group’s holding company’s investor base or debt issuance provides further financial flexibility, as seen with the newly issued $75 million in surplus notes. AM Best notes Knighthead Insurance Group’s adjusted financial leverage and interest coverage remains favorable and are considered adequate as it maintains sufficient liquidity to service its debt.

Knighthead Insurance Group continues to diversify its business and sales profile as it maintains a neutral business profile with adequate operating performance. The group benefits from three distinct business operations, which include reinsurance, international annuities and its growing U.S. annuity business (i.e., Merit). The group had a record year in 2025 in net income while managing its growth in domestic premiums and an increase in reinsurance premiums compared with the prior year. The group experienced strong investment performance and higher fee income, which contributed to overall revenue growth. AM Best notes the mark-to-market performance of Knighthead Annuity’s investment portfolio can result in periodic volatility; however, the company leverages a hedging strategy. Knighthead Insurance Group also maintains an ERM program that is suitable for its current risk profile.

The following Long-Term IR has been affirmed with a stable outlook:

Knighthead Annuity & Life Assurance Company—
-- “bbb” (Good) on $50 million, 9.375% surplus notes, due 2042

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.

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