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Rating Action:

Moody’s upgrades Resolution Life’s issuer rating to Baa2 and affirms the A3 IFSR of Resolution Re; outlooks stable

23 November 2022


London , November 23, 2022 – Moody's Investors Service ("Moody's") has today upgraded the long-term issuer rating of RLGH Finance Bermuda Ltd. (RLGH FB) to Baa2 from Baa3, and affirmed the A3 Insurance Financial Strength Rating (IFSR) of Resolution Re Ltd. (Resolution Re), both subsidiaries of Resolution Life Group Holdings Ltd (RLGH), a Bermuda domiciled inforce life insurance management group, with additional operating subsidiaries in the United States, Australia and New Zealand, collectively referred to as (Resolution Life, or the Group). The outlook of RLGH FB has been changed to stable from positive, the outlook of Resolution Re remains stable.

RATINGS RATIONALE

RLGH FB

RLGH FB's long-term issuer rating was upgraded to reflect the Group's compliance with group supervisory requirements of the Bermuda Monetary Authority (BMA), and alleviation of some of the restrictions on fungibility of assets and capital within the Group, notably through reduction in the extent of debt held at intermediate holding companies. The Baa2 issuer rating reflects Moody's standard notching of holding company senior obligations relative to the credit profiles of its operating subsidiaries for insurance groups that are subject to effective groupwide supervision. The upgrade takes into account the quality of the Group's governance which we expect to be strengthened as a result of it fully implementing the requirements of group supervision.

The Group's credit profile reflects its good market position and track record of growing its portfolio of inforce life transactions, good product and geographic diversification of its reserves, good quality invested asset portfolio, good regulatory and economic capitalisation and strong cash generation and cash-based profitability on its run-off books. In addition, the Group benefits from good financial flexibility, with support from a base of strong private investors including a recently announced partnership with Blackstone Inc. which will become its new general partner and strategic investor.

These strengths are offset by the closed-book nature of the Group's business and lack of active new business generation and distribution capabilities, operational risk stemming from the complex asset-liability matching and hedging strategies used to manage interest rate risk on its long-dated liabilities with guarantees, execution risk related to generating operating efficiencies required to meet profitability targets and its relatively short track record in managing the current portfolio of closed-books, albeit that the seasoned nature of these books somewhat reduces this uncertainty. In addition, some of the reinsurance transactions undertaken by Resolution Re expose the Group to liquidity risk through collateral and margin requirements.

RLGH FB OUTLOOK

The stable outlook reflects Moody's expectation that the Group will continue to strengthen its business profile through acquisition or reinsurance of additional reserves, whilst maintaining a measured risk appetite – particularly as it pertains to its investments - and strong financial profile.

RESOLUTION RE

The A3 IFSR for Resolution Re reflects its good diversification of reserves by product type and geography, growing track record in concluding inforce reinsurance transactions and good financial profile, supported by good regulatory and economic capital, moderate asset risk, given its good quality investment portfolio, and strong current and expected profitability on an economic basis. These strengths are partially offset by its short track record as a life reinsurer, collateral requirements that limit fungibility of capital within the entity and give rise to liquidity risk. In addition, Moody's expects Resolution Re's asset quality to deteriorate slightly going forward, as it increases its allocation to less liquid assets.

Resolution Re is an integral part of the Group's business, enabling it to offer clients both reinsurance and acquisition based closed-book solutions, and is also expected to serve as an internal "reinsurance mixer" which will increase the diversification of its business mix over time.

RESOLUTION RE OUTLOOK

The stable outlook reflects Moody's expectation that Resolution Re will continue to strengthen its business profile through reinsurance of additional reserves, whilst maintaining a measured risk appetite and strong financial profile, including appropriate liquidity buffers against its collateral margin requirements.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

The following factors could lead to upward pressure on the Group and/or Resolution Re's ratings: (i) demonstrated ability to grow market presence and assets under management (AUM) through additional closed-book transactions, and their successful integration, (ii) track record of achieving targeted operating efficiency gains and profitability levels, (iii) demonstrated access to public capital markets and financial leverage consistently at or below 25%, (iv) greater balance between reinsurance and acquisition business that reduces the Group's exposure to liquidity risk related to collateral requirements.

Conversely, the following factors could lead to a downgrade of the Group and/or Resolution Re's ratings: (i) a reduction in regulatory capitalisation at both the group and subsidiary levels, such that levels remain below management's targets, (ii) an increase in financial leverage to levels consistently above 30%, (iii) diminished capacity of the group to handle liquidity requirements in a stress scenario, (iv) a significant increase in asset risk, with greater than planned allocation to higher risk or illiquid assets, (v) evidence of deterioration in the Group's governance and risk management, including increased risk appetite or outsized influence by one party.

PRINCIPAL METHODOLOGIES

The principal methodology used in rating RLGH Finance Bermuda Ltd. was Life Insurers Methodology published in August 2022 and available at https://ratings.moodys.com/api/rmc-documents/391815 . The principal methodology used in rating Resolution Re Ltd. was Reinsurers Methodology published in August 2022 and available at https://ratings.moodys.com/api/rmc-documents/391812 . Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions .

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com .

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com .

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235 .

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com .

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.

Brandan Holmes
VP-Sr Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London
United Kingdom
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

Simon James Robin Ainsworth
Associate Managing Director
Financial Institutions Group
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

Releasing Office :
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London, E14 5FA
United Kingdom
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

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