Fitch Ratings has affirmed the 'BBB+' insurer financial strength (IFS) ratings for Fortitude Reinsurance Company Ltd. (FRL) and Fortitude Life Insurance and Annuity Company (FLIAC).
Additionally, Fitch affirmed the 'BBB' issuer default ratings (IDRs) for Fortitude Group Holdings, LLC, and FGH Parent, L.P., collectively known as Fortitude. The rating outlook has been revised to positive from stable.
The positive outlook reflects Fitch's assessment of Fortitude’s improving company profile, supported by growth and diversification across liabilities and geographies, while maintaining a strong balance sheet.
Fitch also noted expected earnings improvement driven by higher reinvestment rates and portfolio repositioning.
Fortitude’s company profile, historically seen as a limiting factor by Fitch, is now benefiting from expansion efforts, including acquisitions. In the fourth quarter of 2023, FRL assumed $28 billion in life insurance and annuity reserves from The Lincoln National Life Insurance Company. Fitch reported that the performance of this block has aligned with pricing expectations.
Fortitude’s growth also extends to Japan, where the company has completed five reinsurance transactions, including two flow deals. Fitch indicated that further profitable growth and deals performing as expected could be viewed positively.
Fortitude was sold by American International Group, Inc. in 2020 to an investor group led by The Carlyle Group and T&D Holdings. Since then, Fortitude has completed 14 transactions, acquiring more than $100 billion in reserves.
Its largest deal to date occurred in 2022, when it assumed $31 billion of legacy variable annuities (VAs) from Prudential Financial, Inc. Fortitude has revised its hedging strategy for the block, which Fitch noted reduces potential volatility but also limits upside potential.
Fitch recognized Fortitude’s scale, which includes life insurance, annuities, and property/casualty (P/C) business inherited from AIG. Future growth is expected through block acquisitions, particularly in the US and Japan, though Fitch noted that block deals are episodic and market competition remains intense.
Fitch also expects Fortitude to expand its flow reinsurance transactions, which provide more predictable business volumes. Growth through profitable transactions and successful management of existing liabilities would be viewed positively by the ratings agency.
Fitch’s positive outlook reflects its expectation that Fortitude will continue to expand profitably while maintaining capital strength and diversifying its portfolio. The agency noted that sustained growth through profitable transactions, effective risk management, and continued support from Carlyle could lead to further positive developments in the company’s ratings.
However, competition in the block transaction market and episodic growth opportunities could present challenges to Fortitude's trajectory.
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