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Two US insurers have sued specialist rating agency AM Best to prevent it from downgrading its assessment of their financial strength. This is an escalating row over their commitment to Everton bidder 777 Partners.
In a lawsuit filed last week, Atlantic Coast Life Insurance and Sentinel Security Life Insurance, part of U.S. insurance group A-Cap, asked a New Jersey court to stop AM Best from “providing the rating it issued” and the agency to do so to force you to recalculate it. The proposed downgrade would have lowered its financial strength rating by three notches from B++ to B-, they said.
The insurers, which provide life insurance and annuity products to families across America, accused the ratings agency of a “fixation” with 777 Re, the Bermuda reinsurer affiliated with Miami Investment Group.
A-Cap has rushed to take back assets it ceded to 777 Re through reinsurance transactions and regulators have pushed it to reduce its exposure to the investment firm after AM Best raised concerns about the quality of assets held by the reinsurer .
In a separate letter to the court, the plaintiffs’ lawyers argued that “the very existence of [the insurers’] The business is at stake.”
The letter also seeks to summarize AM Best’s position and states that the agency is refraining from publishing the updated credit rating. AM Best reportedly caused the market and insurance customers to rely on outdated information and put the company at risk of violating its own policies if published in a timely manner.
AM Best did not immediately respond to a request for comment.
A Cap said. “This matter is the subject of litigation and we have already set out our views on this in the referenced file. It speaks for itself.”
The A-Cap insurers argued in their lawsuit that AM Best misunderstood the relationship between the insurers and 777 Re, understated 777 Re’s assets and failed to take into account the A-Cap insurers’ progress in reducing their risk Reinsurer. They said AM Best said in an email that it would take $1 billion in writedowns, “primarily on assets held off the books of the A-cap insurers.”
The insurers accused the agency of using “flawed methods, false assumptions and demonstrably false data” and of engaging in a “capricious review process that vacillated wildly between arbitrary ratings without considering relevant information or engaging with the A-cap insurers.” .
The insurers said they had provided new information to AM Best in connection with the recent “successful recovery” of $510 million from 777 Re-related assets that were “transferred at face value to a new insurer.” In the April 23 filing, the insurers said they expected to eliminate their 777 Re exposure by the end of the month.
The audit took its toll on 777 Re, which had helped fund 777 Partners’ investments. The Miami Group has interests in a global portfolio of football clubs including Genoa in Italy, Vasco da Gama in Brazil, Hertha Berlin in Germany and Standard Liège in Belgium.
777 Partners agreed to buy Everton in September 2023 and had expected to complete the acquisition by the end of the calendar year. However, the Premier League has not yet approved the takeover of the Liverpool club.
The league has set a number of conditions for 777 partners to meet, including the need to repay £158m of debt owed to lenders such as MSP Sports Capital in connection with the new stadium Everton is building.
Meanwhile, 777 Partners loaned Everton more than $200 million to meet working capital needs, two people briefed on the matter said.