KBRA Affirms Rating on AeBe ISA Ltd.

KBRA affirms the A- insurance financial strength rating (IFSR) of AeBe ISA Ltd. (AeBe). The Outlook for the IFSR is Stable.

Key Credit Considerations

The rating reflects AeBe’s seasoned management team, strong risk-based capitalization, solid liquidity profile, strong enterprise risk management framework and sound management of the company’s exposure to interest rate risk. KBRA believes that the ISAC framework provides AeBe with a robust corporate structure. At year-end-2023, AeBe’s Bermuda Solvency Capital Requirement coverage ratio was 567%. As AeBe continues to execute its business plan, KBRA expects this ratio to decrease but remain strong over the medium term. AeBe benefits from an experienced management team with deep expertise in reinsurance, asset management, and the Bermuda market. AeBe has a robust formal enterprise risk management framework and KBRA expects AeBe’s risk management program to evolve and mature as the company grows. As a reinsurer of asset intensive life and annuity liabilities, AeBe is exposed to interest rate risk that can cause spread compression or disintermediation depending on whether rates are falling or rising, respectively. KBRA believes that Agam Bermuda’s proprietary pALM platform provides AeBe with an integrated approach to analyze, price, and manage its business in real time across all levels of the company, thereby mitigating exposure to asset-liability mismatches. Balancing these strengths are the company’s limited earnings diversification, execution risk and an evolving competitive and regulatory landscape. Due to its limited tenure in the market, AeBe’s earnings are currently dependent on a small number of transactions. KBRA expects improved earnings diversification as the company continues to execute on its business plan. While management has a track record of building successful businesses as well as investing insurance company assets, KBRA believes that AeBe still faces execution risk. KBRA views AeBe’s business plan as conservative but notes that the asset intensive life and annuity reinsurance market is dominated by a few large competitors that benefit from scale and brand recognition as well as several newer entrants which may challenge AeBe’s ability to execute its business plan. In addition, ongoing changes in local and international solvency regimes has fostered greater uncertainty in an increasingly complex regulatory landscape.

AeBe is an incorporated segregated account (ISA) of Agam Bermuda ISAC Ltd pursuant to the Incorporated Segregated Accounts Companies Act 2019 and is sponsored by 26North Partners LP (26North), a fully integrated, multi-asset class investment platform, founded and led by Josh Harris. The ISAC Act provides an alternative model for corporate structures and gives each ISA in the structure its own separate legal identity.

Rating Sensitivities

Overall results which exceed the forecast provided to KBRA, greater market position in the asset intensive life and annuity reinsurance sector, and a material positive change in risk profile could result in positive rating action. Material underperformance relative to the plan provided to KBRA, inability to reach scale over the medium term, deterioration in risk-based capitalization below targets provided to KBRA or material adverse change in risk profile could result in a negative rating action.

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Methodologies