AM Best has declared that the credit ratings of Cavello Bay Reinsurance, a subsidiary of Enstar Group, are unchanged.

The announcement was made after news that Enstar has entered into a definitive stock purchase agreement to acquire 100 per cent of the shares of Accident Fund Holdings from Blue Cross Blue Shield of Michigan, headquartered in Lansing, Michigan.

Once the acquisition is completed, AF Group will become a wholly owned subsidiary of Enstar and operate largely as a stand-alone company, supported by Enstar.

AF Group is expected to operate under its existing leadership team, while benefiting from the scale, network and expertise of Enstar and its investor group, including its partnership with Sixth Street.

AM Best will monitor the acquisition progress through and after completion.

The transaction is expected to be completed in the second half of 2026 upon regulatory approvals and satisfaction of various other closing conditions.

Assuming that the acquisition is completed as contemplated, AM Best does not expect its execution to result in any immediate changes to Cavello Bay’s credit ratings.

The agency expects that Enstar’s financial leverage will remain within tolerance levels for its present ratings.

The firm said if financial leverage is sustained at elevated levels for longer than contemplated, or if the terms of the financing differ materially from expectations, then AM Best could revisit the transaction’s impact on Enstar’s overall credit profile.

Although AF Group’s acquisition will significantly change Enstar’s business profile by adding underwriting activities to Enstar's existing run-off business, AM Best did not anticipate a change in Enstar’s business profile assessment.

“Enstar has extensive experience in actively managing workers’ compensation reserves, AF Group's main line of business,” AM Best said. “While Enstar does not intend to change AF Group's business strategy, Enstar can provide knowledge in reserves and claim payments areas, as Enstar’s has consistently outperformed the workers’ compensation industry, recording consistent prior-year favourable reserve developments over time.”