Everton buyer’s reinsurance arm hit with rating downgrade
777 Re, the Bermuda-based reinsurance entity of investment firm 777 Partners, has had its financial strength rating downgraded by AM Best due to significant exposure to less liquid investments.
AM Best has downgraded the FSR of 777 Re, which is associated with the group buying English Premier League football club Everton, to C- (Weak) from B (Fair).
The ratings agency downgraded the Class E life re/insurer from A- to B in November, citing a significant exposure to less liquid investments.
AM Best said: "The ratings reflect 777 Re’s balance sheet strength, which AM Best assesses as very weak, as well as its marginal operating performance, very limited business profile and weak enterprise risk management.
"The rating action reflects a revision in 777 Re. Ltd.’s balance sheet strength assessment to very weak, due to a significant exposure to less liquid affiliated investments."
It said it had also adjusted its view of the company’s operating performance and business profile downward "reflecting its diminished ability to write new business while simultaneously planning to address existing liabilities".
It added: "The company is working with the Bermuda Monetary Authority to reduce its exposure to affiliated assets, which is the primary driver of the material decline in its risk-adjusted capitalisation.
"Finally, the company’s risk management controls have shown some weakness, including the significant year-over-year increase in affiliated assets, which the company needs to address in the near term. The ratings will remain under review with negative implications until the company successfully executes on its plan to reposition its asset portfolio and bring its risk management practices in line with AM Best’s expectations."
AM Best has maintained the under review with negative implications status for these credit ratings.
777 Re is a subsidiary of 777 Partners, which is in the process of buying Everton for £500 million. The bid has run into regulatory challenges following the downgrade of 777 Re, with the re/insurer, which completed a string of acquisitions of active and run-off blocks of life insurance and annuity business underwritten by global insurance companies.
It was founded by Will Rinehimer, who was previously president and CFO of Front Street Re. Previously he served as president and CFO of Ace Tempest Life Reinsurance. He is also a co-founder of Bermuda International Long-Term Insurers and Reinsurers (BILTIR) and is a member of the Bermuda Insurance Advisory Committee (IAC).
777 Partners, which has been active in financial services and more recently purchases of sports assets, founded 777 Re in 2019. It is run by Miami-based Josh Wander.
UK media reports said 777 had been asked by the EPL to provide further details of their funding and assurances they can bankroll the club for at least the next few years this week, in another indication that approval for the takeover is not guaranteed. A decision on whether its bid for Everton will be approved by the EPL is expected by the end of the month.
777 has reportedly been funding Everton since September, and have committed around £190 million in loans to meet the club’s operating costs and the construction of their new stadium at Bramley Moore Dock.
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