A.M. Best has affirmed the long-term issuer credit rating (ICR) of “a+” on the initial $1.2 billion of 5.75 percent secured notes issued by Redding Funding, a wholly owned subsidiary of Wilton Re (WRL).
The outlook of the rating for the notes, which are due 31 December 2058, is stable. As of 31 December 2017, there is still $905 million outstanding.
The notes were part of a deal used to fund statutory reserve requirements for a block of life insurance policies that Wilton Reassurance Company ceded to South Carolina-based captive insurer, Redding Reassurance Company 2.
As the statutory reserve requirements are reduced, the amount of the corresponding notes will also be reduced.
When the notes were issued, the Canada Pension Plan Investment Board, the parent of WRL, contributed $1.2 billion to WRL, which in turn provided that amount to Redding Funding to collateralise the notes.
The rating affirmation is evidence of the rating agency’s opinion of the issuer’s ability to meet its financial obligations to the noteholders when due.
According to A.M. Best, the rating is primarily based on the fact that the notes issued “are collateralised by a pool of invested assets, which as of 31 December 2017, other than a small amount in a money market fund, were entirely invested in US Treasuries.”
In addition to: “The potential losses of the collateral portfolio due to defaults and lack of marketability of the investments over the notes legal maturity period; and the support provided by WRL as guarantor of Redding Funding’s payment obligations.”
The long-term ICR may be altered and the outlook revised if material changes occur in the credit ratings of the underlying collateral or the long-term ICR of the guarantor.
