OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of BTG Pactual Resseguradora S.A. (BTG Re) (Brazil). The outlook of these Credit Ratings (ratings) remains negative.
The ratings of BTG Re reflect its strong risk-adjusted capitalization and short but successful operating performance. BTG Re is a local reinsurer in Brazil, operating in the surety segment with plans to expand geographically and by line of business. The company's parent, Banco BTG Pactual S.A. (BTG Pactual), has provided capital support as well as operational and risk management capabilities.
Also reflected in the ratings is the impact of the credit profile of BTG Re’s ultimate parent, Banco BTG Pactual S.A., and the challenging macroeconomic and (re)insurance conditions still being experienced in Brazil. While the credit profile of BTG Pactual has begun to stabilize A.M. Best believes there potentially could be an adverse impact on the operations of BTG Re. Nonetheless, BTG Re maintains solid stand-alone attributes in terms of operating performance and risk-adjusted capitalization. BTG Re has been able to produce positive overall earnings since inception, driven by investment income and complemented by underwriting results. BTG Re also benefits from a solid retrocession program that mitigates much of its underwriting exposures.
Furthermore, Brazil’s (re)insurance market is highly competitive with domestic and global reinsurers continuing to enter the market. Additionally, BTG Re, which acts as a captive reinsurer for its sister company, Pan Seguros S.A. (51% owned by BTG Pactual), will be challenged to develop and expand its product offerings in its local markets, as well as in other Latin America territories, each with their own unique market dynamics.
A.M. Best will monitor BTG Re's operating performance, risk-adjusted capitalization and the execution of its business plan, in particular its product and geographic expansion.
The key rating driver that could lead to a positive action in BTG Re’s ratings is the continued improvement of the credit profile of its parent company, Banco BTG Pactual.
Factors that could negatively impact the ratings are the deterioration of its parent's credit profile or liquidity position, or a decline in the risk-adjusted capitalization or the operating performance of BTG Re.
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