KBRA Assigns Rating to JAB Holdings UK Ltd. and Affirms Ratings for Prosperity Subsidiaries Following Acquisition by JAB Holding Company

NEW YORK--(BUSINESS WIRE)--
KBRA removed from Watch Developing and affirmed the A- insurance financial strength ratings (IFSRs) of S.USA Life Insurance Company, Inc., National Western Life Insurance Company, SBLI USA Life Insurance Company, Shenandoah Life Insurance Company, and Prosperity Life Assurance Limited with Stable Outlooks. KBRA assigned a BBB- Issuer rating to JAB Holdings UK Ltd. with a Stable Outlook. The BBB- Issuer rating of Prosperity Group Holdings, LP (PGH) was removed from Watch Developing, affirmed with a Developing Outlook and subsequently withdrawn due to the reorganization of this entity following the closing of the acquisition transaction.

Key Credit Considerations

The removal of the Watch Developing Status and affirmation of the ratings are based on Prosperity’s experienced management team that is further enhanced with JAB Holding Company’s expert insurance segment leadership, broad access to financial flexibility and long-term capital, solid capitalization, relatively stable liabilities, risk management that continues to mature, and Prosperity achieving scale through its acquisition of National Western in mid-2024. Due to the inter-generational structure of JAB Holding Company, its investment in Prosperity is long-term and JAB plans to provide ongoing capital support to Prosperity’s build-out as needed. Historically JAB Holding Company’s investments were focused on various consumer sectors. More recently, JAB made the strategic decision to diversify into the life and annuity industry, which it views as a defensive and lower-risk sector with attractive profit dynamics. Prosperity represents JAB’s entry into the sector, and it is expected to be a foundational part of JAB’s strategy to build a global life/annuity business at scale. JAB Holding Company has ~$70 billion in assets, including JAB Insurance.

Balancing these strengths are ongoing execution risk related to Prosperity’s continued organizational build out and the acquisition by JAB, ongoing systems and risk management investments, rapid growth and its recent large acquisition of NWL. KBRA views the company’s enterprise risk management (ERM) as appropriate for its current stage of development and, while acknowledging material enhancements to-date, also notes that ERM needs to continue to mature to keep pace with the company’s ongoing transformation and growth. New business strain and business-investment costs have been constraints on profitability, but strain is nearing an inflection point and major costs related to investments in the business are expected to sunset in future years. Other factors offsetting strengths include highly competitive targeted organic and inorganic markets, and material reliance on third parties such as its owner and credit facility providers for near-term cash resources at Prosperity’s holding companies.

Rating Sensitivities

Factors that could positively impact the rating include enhanced levels and consistency of earnings and profitability materially ahead of plan while maintaining strong capitalization, enhanced balance in business mix profile, demonstrated in product reserves and earnings as well as in geographic mix of premiums, enhanced market position in its targeted organic markets, solidified market position in M&A/Reinsurance, development of material financial resources available to the holding company beyond additional borrowings or JAB capital contributions, and development of material, sustained capital cushions at each (re)insurer.

Factors that could negatively impact the rating include strategic plan execution that materially lags expected milestones under its new ownership, any material negative change to Prosperity’s risk profile, lack of continued ERM maturation consistent with Prosperity’s growth and transformation, inability to further outrun new business strain resulting in profitability materially behind plan, material evidence of a decline in JAB’s commitment to Prosperity, and lack of development of financial resources available to the holding company beyond additional borrowings or JAB capital contributions.

To access ratings and relevant documents, click here.

Click here to view the report.

Methodologies

• Insurance: Insurer & Insurance Holding Company Global Rating Methodology
• ESG Global Rating Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

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), one of the major credit rating agencies (CRA), is a full-service CRA 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 (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1012091

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Analytical Contacts

Donna Halverstadt, Managing Director (Lead Analyst)

+1 646-731-3352

donna.halverstadt@kbra.com

Carol Pierce, Senior Director

+1 646-731-3307

carol.pierce@kbra.com

Lewis Delosa, Director

+1 646-731-2312

lewis.delosa@kbra.com

Peter Giacone, Senior Managing Director (Rating Committee Chair)

+1 646-731-2407

peter.giacone@kbra.com

Business Development Contact

Tina Bukow, Managing Director

+1 646-731-2368

tina.bukow@kbra.com

Source: Kroll Bond Rating Agency, LLC