While it has maintained a stable outlook on its excellent ratings, AM Best warns of potential volatility on the horizon for North End Re, particularly in the latter half of 2024.
The Bermuda-based reinsurer has maintained its A- (Excellent) financial strength rating and the long-term issuer credit rating of "a-" (Excellent), which AM Best attributed to its robust balance sheet, along with its satisfactory operational performance, neutral market position, and effective enterprise risk management strategies.
Yet, there is an expectation of volatility in balance sheet metrics as the company plans to expand its business in H2 2024. In preparation for increased operations, North End Re is expected to leverage both internal and external credit facilities to ensure liquidity and maintain capital levels.
The company notably completed a significant transaction in the third quarter of 2021, reinsuring $1.6 billion in fixed deferred annuities.
North End Re operates as a subsidiary of Brookfield Reinsurance. Its operations are complemented by its sibling entities, North End Re (Cayman) SPC, and Brookfield Annuity Company, which offers pension risk transfer solutions in Canada.
AM Best notes that challenges for North End Re include intense market competition and the impact of rising interest rates on investment returns, which have adversely affected earnings in the past two years. Despite these setbacks, AM Best still recognizes the potential long-term benefits of increased yields on the company’s investments due to higher interest rates.
Additionally, while the absence of new transactions in 2022 and 2023 highlights the competitive nature of the market North End Re Ltd. operates within, the company’s rapid initial success demonstrates its capability to compete effectively.
Elsewhere, parent firm Brookfield Reinsurance has announced that its Iowa Insurance Division has scheduled a hearing for April 5, 2024, regarding its planned acquisition of American Equity Investment Life Holding Company (AEL).
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