A.M. Best Places Ratings of Global Atlantic Financial Group’s Insurance
Subsidiaries Under Review With Negative Implications
OLDWICK, N.J. -- May 3, 2013
A.M. Best Co. has placed under review with negative implications the financial
strength rating (FSR) of A- (Excellent) and issuer credit ratings (ICR) of
“a-” of Commonwealth Annuity and Life Insurance Company (Commonwealth) and its
subsidiary, First Allmerica Financial Life Insurance Company (FAFLIC) (both
domiciled in Southborough, MA), both ultimately owned by The Global Atlantic
Financial Group (Global Atlantic).
The rating actions follow the May 1, 2013 announcement that Commonwealth has
signed a definitive agreement to purchase AVIVA plc’s (AVIVA) U.S. life
insurance business through a reinsurance agreement. The transaction is
contingent upon Athene Holding Ltd.’s (Athene) successful acquisition of
AVIVA’s U.S. life insurance and annuity business, which is written by Aviva
Life and Annuity Company and Aviva Life and Annuity Company of New York
(together known as Aviva USA).
While the acquisition of Aviva USA is consistent with Commonwealth’s growth
strategy, A.M. Best views the magnitude of this potential transaction as
significant. As a result, there is uncertainty with respect to the impact on
its balance sheet and financial metrics; thus, the ratings have been placed
under review with negative implications. All ratings will remain under review
pending A.M. Best's review of this acquisition, as well as any discussions
concerning the integration plans to determine the transaction's overall impact
on the company’s ratings.
The ratings also recognize the recent change in Commonwealth’s ownership
structure and separation from The Goldman Sachs Group, Inc. (Goldman Sachs).
Recently, Global Atlantic completed a successful private placement with a
diversified investor base of over 1,000 shareholders, including Goldman Sachs,
which will retain a minority stake. It is expected that Global Atlantic will
maintain profitability and growth under this new ownership structure.
Offsetting rating factors include the loss of the Goldman Sachs brand and
capital support as Global Atlantic will need to establish new brand awareness
and implement certain infrastructure and systems capabilities as a stand-alone
Concurrently, A.M. Best has assigned an FSR of A- (Excellent) and ICR of “a-”
to Commonwealth Annuity and Life Reinsurance Company Limited (Commonwealth Re)
(Bermuda). Consistent with the other life insurance subsidiaries of Global
Atlantic, these ratings have been placed under review with negative
The ratings assigned to Commonwealth Re reflect its role as an offshore
captive reinsurance company for Global Atlantic’s life insurance business. The
company reinsures approximately 70% of Global Atlantic's life insurance
business mostly though assumed business from its affiliate, Commonwealth.
Commonwealth Re is expected to provide added transaction flexibility for the
group. A.M. Best views the initial capitalization in support of its assumed
business as adequate, and there is an expectation of profitable growth.
Offsetting rating factors include Commonwealth Re’s large percentage of
interest-sensitive and separate account liabilities, which may expose it to
disintermediation risk and spread compression due to the continuing low
interest rate environment.
The methodology used in determining these ratings is Best’s Credit Rating
Methodology, which provides a comprehensive explanation of A.M. Best’s rating
process and contains the different rating criteria employed in the rating
process. Best’s Credit Rating Methodology can be found at
A.M. Best Company is the world's oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
Edward Kohlberg, 908-439-2200, ext. 5664
Senior Financial Analyst
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
William Pargeans, 908-439-2200, ext. 5359
Assistant Vice President
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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