OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of “a+” of BMO Reinsurance Limited (BMO Re) (Barbados). The outlook for both ratings is stable.
BMO Re is an indirect wholly owned subsidiary of Bank of Montreal (BMO) (Toronto, Ontario) and is a reinsurer of life, property/casualty and disability risks. The ratings of BMO Re reflect its stable net income trends, favorable risk-adjusted capitalization and strong liquidity in its investment portfolio. BMO Re continues to maintain strong risk-adjusted capitalization levels, as well as low levels of credit risk within its investment portfolio, which is primarily invested in highly-rated sovereigns, supranationals and corporate bonds. Year-over-year premium volume growth over consecutive years has been driven by diversification in its business mix to include life and non-life risks.
Volatility in economic conditions in Europe could impact BMO Re’s ability to retrocede assumed risks to its European counterparties. BMO Re continues to have exposure to potential earnings volatility from its assumed property/casualty risk; however, A.M. Best notes that this risk has a lesser degree of volatility compared with previous years.
Positive rating actions are unlikely in the near to intermediate term. Factors that could cause negative rating actions include a significant decline in the company’s capitalization or business outlook, a decline in operating performance that impacts its business model or negative rating actions at Bank of Montreal.
Furthermore, the pending federal budget to be introduced in the Parliament of Canada may reduce certain benefits on reinsurance and negatively impact BMO's business profile.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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