MBIA Inc (MBI)

[lecorb]

Rating Action: Moody's MBI:In the oven

RATINGS RATIONALE



Moody's ratings of securities that are insured by a financial guarantor are maintained at a level equal to the higher of a) the rating of the guarantor or b) the published underlying rating. The Baa1(sf) rating of the notes reflects this modified "credit substitution" approach and is now equal to the underlying rating of the notes without incorporating the benefit of a financial guaranty policy provided by MBIA Insurance Corporation (MBIA, insurance financial strength at B2; negative outlook).



Moody's Senior Vice President Scott Robinson commented: "The affirmation reflects deal performance that is in line with our expectations of the underlying reinsurance cash flows as well as the performance of the invested assets backing the liabilities." The rating agency noted that there has been minimal asset impairments and exposure to real estate-related structured finance securities has enabled the notes to avoid some of the investment pressures faced by other life insurance-linked securities.



Northwind Holdings, LLC's ratings were assigned by evaluating factors that Moody's considers relevant to the credit profile of the notes, such as (i) the demographics and actuarial experience of the referenced block of (re)insurance business, (ii) relevant industry experience for similar products/underwriting, (iii) review of independent actuarial report, including assumptions underlying projected cash flows, (iv) expected loss and probability of default estimated via stochastic and deterministic modeling of the insurance cash flows and the performance of invested assets, and (v) other factors believed to be applicable to the assessment of the creditworthiness of the transaction, such as a review of the structural, legal, and regulatory risks.



Northwind Holdings is the shareholder of Northwind Reinsurance Company (Northwind Re), a special purpose captive reinsurance company domiciled in Vermont. Northwind Re was set up for the sole purpose of executing reinsurance agreements with the following Unum subsidiaries: Provident Life and Accident Insurance Company, The Paul Revere Life Insurance Company, and Unum Life Insurance Company of America (collectively "Unum Lifecos": financial strength ratings of A2/stable outlook) to facilitate the funding of capital supporting a closed block of both active and disabled life reserves.



Factors that would lead to an upgrade or downgrade of the rating:



The following factors could place upward pressure on the rating: 1) continued pay down of principal in line with target amortization 2) actuarial experience exceeding expectations; and 3) company action level RBC ratio consistently at least 200%. Conversely, the following could place downward pressure on the rating: 1) pay down of principal less than targeted amortization 2) actuarial experience below expectations; and 3) company action level RBC ratio consistently below 200%.


https://www.moodys.com/research/Moodys-affirms-Unums-Northwind-insurance-linked-securities-at-Baa1sf-stable--PR_325918?WT.mc_id=