MEXICO CITY--(BUSINESS WIRE)--AM Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb” to Reunion Re Compañia de Reaseguros S.A. (Reunion Re) (Argentina). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Reunion Re´s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Reunion Re’s balance sheet strength is underpinned by its risk-adjusted capitalization, as measured by Best´s Capital Adequacy Ratio (BCAR), which is at the strongest level. The ratings also reflect the company’s sound underwriting practices and investment strategy consistently supporting profitability despite a volatile economic environment, a well-structured reinsurance program, seasoned management team, and synergies provided by its main shareholder. Partially offsetting these positive rating factors are Reunion Re´s volatility in bottom line results derived from operating in an economy with high inflation.
Reunion Re initiated operations in Bueno Aires in 2012 and ranks among the top reinsurance companies in terms of premium market share. The company operates through a network of brokers and direct distribution channels in several cities throughout Argentina and Paraguay.
Reunion Re’s risk-adjusted capitalization has been maintained at the strongest level and is supportive of its ratings. Historically, the company has increased capital at a 40% compound annual growth rate supported by positive bottom-line results, driven by a consistent inflow of underwriting and investment income, which reflects the management team’s market knowledge and well-rounded experience in Argentina. A well-balanced reinsurance program placed among counterparties with a strong security level also reinforces the company’s risk-adjusted capitalization.
In AM Best´s view, the reinsurer has shown disciplined underwriting in a highly volatile market driven by inflation and foreign exchange rates. Despite the latter hurdles, in addition to negative effects derived from non-recurring adjustments in premiums reporting, Reunion Re has managed to maintain overall premiums sufficiency levels. By year-end 2018, the company´s sustained profitability reflected in a return on equity and return on assets of 25.2% and 4.2%, respectively, mainly driven by improvements in underwriting results including contained acquisition and management expenses.
Positive factors that might improve the rating level or outlooks include improvements in Argentina’s country risk profile in combination with a stable upward trend in Reunion Re’s profitability, while maintaining supportive risk-adjusted capitalization. Factors that could lead to negative rating actions include protracted adverse underwriting performance that leads to a significant deterioration in its risk-adjusted capitalization.
This press release relates to Credit Ratings that have been published on AM 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 AM 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. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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