OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of IRB Brasil Resseguros S.A. (IRB) (Brazil). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect IRB’s strong risk-adjusted capitalization, robust operating performance and strong regional business profile.
IRB has generated very strong overall earnings in recent years, driven by both investment and underwriting income that are reflected in the company’s favorable return metrics. After Brazil opened its reinsurance market in 2007, IRB experienced volatility in both premium volume and underwriting results. However, since that difficult initial transition period, IRB has reformed a book of business that is now both profitable and highly diversified by line of business.
Investments returns are substantially higher in Brazil relative to current North American/European standards due to higher yields; however, it is important to note that Brazil’s annual inflation rate has been in the high single digits for the past few years so inflation-adjusted returns are lower but still higher than in North America and Europe. IRB’s return on equity is among the highest for reinsurance companies in the industry.
Partially offsetting these positive factors is IRB’s exposure to concentration risks related to regulatory, macroeconomic and political dynamics, as well as its concentration of underwriting and investments in Brazil.
While IRB has executed plans to mitigate these risks, A.M. Best believes these exposures still present a significant challenge.
Rating factors that could lead to a positive outlook or an upgrade include successfully demonstrating its ability to operate in an evolving regulatory environment, an improvement in the Brazil’s macroeconomic and political environment and the successful implementation of the company’s international diversification plans, while maintaining strong risk-adjusted capitalization and operating performance.
Factors that could lead to negative rating actions include a material decline in risk-adjusted capitalization or operating performance, the unsuccessful execution of the company’s international growth strategy or a downgrade in Brazil’s country risk tier.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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