KBRA has affirmed the A insurance financial strength ratings for Somerset Reinsurance and Somerset Reinsurance Company.

The credit ratings agency also affirms the BBB+ issuer rating for Somerset Holdings International.

Collectively referred to as Somerset, the outlook for all ratings is stable.

KBRA said the ratings reflect Somerset’s well capitalised balance sheet, robust profitability profile, comprehensive enterprise risk management framework, high credit quality investment portfolio, strong asset-liability matching, balanced reserve mix, seasoned management team and ample access to capital.

Somerset Re’s year end 2024 capital position was strong with a 228 per cent Bermuda Solvency Capital Requirement coverage ratio and $1.2 billion of liquidity on its balance sheet.

Last year Somerset Re reported robust IFRS-17 insurance service and combined (insurance-plus-investment) margins of 28.3 per cent and 32 per cent, respectively, supported by favourable claims experience and sizeable contractual service margin amortisation.

Somerset Re is expected to maintain strong margins as the company continues to scale.

The credit ratings agency thought that the ERM was maturing in line with the growth of the company and regulatory requirements.

As of year end 2024, KBRA considered Somerset’s investment portfolio to be of high credit quality.

Approximately 94 per cent of fixed-income market value was in investment grade securities.

KBRA also considered investment risk to be moderate. Interest-rate risk was meaningful given the eight-year duration, but convexity was low, and treasury/agency holdings provided additional rate hedging. Credit risk was well dispersed across sectors and securitised sleeves were largely in senior tranches.

Liquidity risk was low-to-moderate as public bonds dominated, although the private-credit sleeves introduced some funding lock-up.

Overall, KBRA believed that the investment portfolio profile at the end of 2024 was consistent with a conservative, income-focused life reinsurer, carrying measured spread and reinvestment risk.