KBRA Assigns Rating to AeBe ISA Ltd.

KBRA assigns an A- insurance financial strength rating (IFSR) to AeBe ISA Ltd (AeBe), a Class E licensed Bermuda-based reinsurer that has GAAP total assets of approximately $4.4 billion as of June 30, 2023. The Outlook for the rating is Stable. AeBe is an incorporated segregated account (ISA) of Agam Bermuda ISAC Ltd pursuant to the Segregated Accounts Companies Act 2019 and is sponsored by 26North Partners LP (26North), a fully integrated, multi-asset class investment platform, founded and led by Josh Harris, with approximately $13 billion in AUM across private equity, private credit and insurance solutions. The ISAC Act provides an alternative model for corporate structures and gives each ISA in the structure its own separate legal personality.

Key Credit Considerations

The rating reflects AeBe’s corporate structure, very strong risk-based capitalization, seasoned management team, strong enterprise risk management framework and sound management of the company’s exposure to interest rate risk. KBRA believes that the ISAC structure provides a robust corporate framework as well as operational flexibility to AeBe as the company onboards future business. At end-2022, AeBe’s Bermuda Solvency Capital Requirement ratio was 541%. As AeBe executes its business plan, KBRA expects this ratio to decrease but remain strong over the medium term. AeBe benefits from an experienced management team with deep expertise in reinsurance, asset management, and the Bermuda market. AeBe has a robust formal enterprise risk management framework built on the three lines of defense model. KBRA expects AeBe’s risk management program to evolve and mature as the company grows. As a reinsurer of asset intensive life and annuity liabilities, AeBe is exposed to interest rate risk that can cause spread compression or disintermediation depending on rising/falling rates. KBRA believes that Agam Bermuda’s proprietary pALM platform provides AeBe with an integrated approach to analyze, price, and manage its business in real time across all levels of the company, thereby effectively mitigating this exposure. Balancing these strengths are the company’s limited earnings diversification, execution risk and a competitive annuity reinsurance market. Due to its limited tenure in the market, AeBe’s earnings are currently dependent on a small number of transactions. KBRA expects improved earnings diversification as the company executes on its business plan. While management has a track record of building successful businesses as well as investing insurance company assets, KBRA believes that AeBe still faces execution risk. KBRA views AeBe’s business plan as conservative but notes that the annuity reinsurance market is dominated by a few large competitors that benefit from scale and brand recognition as well as several newer entrants, both of which may challenge AeBe’s ability to execute its business plan. Agam Bermuda is one of four ISACs licensed by the Bermuda Monetary Authority since passage of the ISAC Act and the only ISAC to hold a Class E long term insurer license. AeBe is also licensed as a Class E long term insurer and commenced reinsuring asset-intensive life and annuity business during 2022.

Rating Sensitivities

Overall results which exceed the forecast provided to KBRA, greater market position in the asset intensive life and annuity reinsurance sector, and a material positive change in risk profile could result in positive rating action. Material underperformance relative to the plan provided to KBRA, inability to reach scale over the medium term, deterioration in risk-based capitalization below targets provided to KBRA or material adverse change in risk profile could result in a negative rating action.

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Methodologies

Insurance: Insurer & Insurance Holding Company Global Rating Methodology

ESG Global Rating Methodology

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

Doc ID: 1002731

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