KBRA Affirms Ratings for Venerable Holdings, Inc. and Subsidiaries

KBRA affirms the BBB issuer rating of Venerable Holdings, Inc., the BBB debt rating of Venerable’s 6.257% subordinated term loan, the A insurance financial strength ratings of its subsidiaries, Venerable Insurance and Annuity Company (VIAC) and Corporate Solutions Life Reinsurance Company (CSLR), and the debt rating of BBB+ for VIAC’s and CSLR’s surplus notes. The Outlook for all ratings is Stable.

The rating reflects a highly skilled management team that continues to successfully execute its strategy, a track record of strong hedging and overall risk management, robust liquidity and asset/liability management, material internal capital generation with sustained maintenance of solid capitalization, and a strong and expanding market position in the variable annuity (VA) reinsurance market. Balancing these strengths are business concentration risk in variable annuities, high counterparty exposure, and execution risk related to its growth through acquisition strategy and business line extension. Sustained, successful execution of its new three-pillar growth strategy could create a more stable, diversified and balanced growth profile.

Venerable’s strategy combines growth and optimization. Its growth strategy initially focused on acquiring run-off blocks of variable annuities through reinsurance and legal entity acquisitions but has since expanded to include flow reinsurance and VIT/investment adviser businesses. Ongoing seller interest in transferring VA block risk is expected to support further block activity with Venerable. Growth in flow reinsurance could come from new counterparties or higher sales volumes with its existing counterparty, while the VIT/investment adviser business could expand through fund inflows and acquisitions.

Factors that could positively impact the rating include targeting and achieving a higher risk adjusted capital position on a sustained basis, actual results that consistently and materially exceed management’s expectations, sustained reduction in year-over-year volatility in annual projections exclusive of the impact of acquisitions, or successful execution of its three-pillars growth strategy resulting in material and sustained diversification of results and business profile. Factors that could negatively impact the rating include deterioration in the company’s risk profile, material reductions in excess liquidity and/or excess capital, material erosion of market position, actual results consistently and materially below management’s expectations, or an acquisition that materially weakens operations, financial profile, or the company’s risk management framework.

The rating on the subordinated term loan could be lowered if more than a minimal amount of senior debt comes into the capital structure on a sustained basis, or if loan interest is paid via the electable PIK feature.

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