AM Best Affirms Knighthead Insurance Ratings
AM Best affirmed the A- financial strength rating for Knighthead's insurers and rated $75 million in new surplus notes.
Updated on Nov. 4, 2026 in Corporate Finance
AM Best affirmed the Financial Strength Rating of A- (Excellent) for Knighthead Annuity & Life Assurance Company and Merit Life Insurance Co., with a stable outlook. The rating agency also assigned a "bbb" (Good) Long-Term Issue Credit Rating to $75 million in 8.5% surplus notes due 2046 issued by Knighthead Annuity.
Why it matters
The affirmations reflect the group's strong balance sheet, adequate operating performance and appropriate enterprise risk management, which signal financial stability to policyholders and investors. The new debt adds capital to the group's structure at a time when it reported a record year in net income in 2025.
AM Best's assessment rests on the group's financial strength and debt terms: the A- (Excellent) rating for both insurers and the bbb (Good) rating on $75 million of 8.5% surplus notes due 2046. The source does not disclose the proceeds' intended use or the size of the group's illiquid credit holdings.
The players
AM Best
AM Best is a global credit rating agency specializing in the insurance industry, known for its Financial Strength Ratings that assess insurers' ability to meet policyholder obligations.
Knighthead Insurance Group
Knighthead Insurance Group is a holding company whose operations span reinsurance, international annuities and U.S. annuities through subsidiaries including Knighthead Annuity and Merit Life.
The details
Knighthead Annuity & Life Assurance Company and Merit Life Insurance Co. are rated under the Knighthead Insurance Group, which AM Best describes as having three business operations: reinsurance, international annuities and U.S. annuities. AM Best cited the group's strong balance sheet, neutral business profile and enterprise risk management program as factors supporting the ratings, while noting that Knighthead Annuity holds illiquid credit investments alongside high allocations to cash and public fixed-income instruments.
Timeline
2025: Knighthead Insurance Group records its best year in net income.
2042: Existing $50 million 9.375% surplus notes mature; affirmed at bbb with a stable outlook.
2046: Newly issued $75 million 8.5% surplus notes mature.
Market Dynamics
The affirmations hold Knighthead's insurers at the A- (Excellent) tier of AM Best's published Financial Strength Rating scale, with a stable outlook. The new surplus notes are rated bbb (Good), one notch below the insurers' own rating, which is consistent with how debt is typically rated below an issuer's financial strength rating.
For holders of Knighthead's surplus notes, the bbb (Good) rating and stable outlook indicate the agency sees moderate credit risk on the 2042 and 2046 instruments. Policyholders of the affiliated insurers can take the A- (Excellent) affirmation as a continued indicator of the companies' capacity to meet their obligations.
The takeaway
The affirmations and the new $75 million debt issuance point to a balance sheet that AM Best considers strong, with the group's record 2025 net income supporting that view. Readers tracking insurance-sector credit should note that the ratings are stable rather than upgraded or downgraded.
Further reading
For broader context on how companies raise capital through debt, see the Corporate Finance section.
