OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” of J.Malucelli Resseguradora S.A. (JM Re) and J.Malucelli Seguradora S.A. (JM Seguradora) (both domiciled in Brazil). The outlook of these Credit Ratings (ratings) remains stable.
The ratings of JM Re and JM Seguradora (collectively JM) reflect the group’s strong risk-adjusted capitalization, consistently profitable results and solid business profile as a leading surety reinsurer in Brazil. JM Re is classified as a local reinsurer in Brazil and essentially servers as a captive reinsurer of an organization writing surety business for more than twenty years. JM Seguradora is market facing and the leading surety writer in Brazil, and also writes the DPVAT (motor third-party liability) compulsory auto insurance as part of a pool of insurers. JM derives operational benefits from its 49.5% minority shareholder, The Travelers Companies, Inc. These benefits include collaboration on enterprise risk management, employee development, retrocession placement, claims handling and other operational functions. JM maintains strong leverage and liquidity metrics, and a comprehensive retrocession program that provides additional capacity and reduces the company’s overall exposures.
Partially offsetting these positive rating factors is JM’s concentration risk as essentially a mono-line surety writer in a single country. JM’s future plans to mitigate this risk include expansion into related lines of business and geographic diversification into other parts of Latin America. Additionally, Brazil’s (re)insurance market is becoming increasingly competitive, with home-grown and global (re)insurers vying for market share. Despite Brazil’s economy beginning to show signs that the economic recession might have ended, companies are still seeking international expansion while keeping an eye on the under-penetrated domestic insurance market. Surety is one of the fastest-growing segments in the (re)insurance industry in Brazil.
Rating factors that could lead to a positive rating movement include successful long-term execution of JM's growth and diversification strategy and consistent operating performance along with maintaining robust risk-adjusted capitalization. Negative rating triggers include deterioration in operating results or risk-adjusted capitalization, the inability for JM to execute its growth and diversification strategy, a continued weakness in Brazil’s economy or a downgrade in Brazil’s country risk tier.
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