OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has placed under review with developing implications the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Terra Brasis Resseguros (Terra Brasis) (Brazil).
The rating actions follow the recent announcement that Austral Resseguradora S.A. (Austral Re) and Terra Brasis have entered into a definitive agreement to merge their reinsurance operations. The combined entity will be the fifth-largest reinsurer based on estimated surplus (BRL 377 million, or USD 97 million), and the third-largest reinsurer based on estimated premiums (BRL 766 million, or USD 197 million annualized) in Brazil’s reinsurance market, as of March 2019. The two companies have been in discussion for a few months, likely in an attempt to create a stronger reinsurance player in Brazil. The deal is expected to close within six months, after regulatory (SUSEP) and anti-trust (CADE) approvals.
The shareholders of the proposed combined entity will be Vinci Partners, Brasil Plural and the International Finance Corporation (IFC), the financial arm of the World Bank. Bruno Freire, currently Austral Re’s CEO, will be the CEO of the combined entity. Rodrigo Botti, which is currently Terra Brasis’ CEO, will be the chief financial officer of the combined entity.
The ratings will remain under review pending the completion of the transaction. AM Best will continue to hold discussions with both companies and monitor their risk-adjusted capitalization, operating performance, business profile and enterprise risk management.
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