OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of BTG Pactual Resseguradora S.A. (BTG Re) (Brazil). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect BTG Re’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
BTG Re has local reinsurer status in Brazil, operating predominantly in the surety segment, and more recently, in the agricultural segment. The company’s parent, Banco BTG Pactual S.A. (BTG Pactual), has provided capital support in the past, and continues to provide operational support and risk management capabilities.
At the end of 2020, BTG Re entered into a significant loss portfolio transfer transaction, which materially increased the size of its year-end 2020 balance sheet. BTG Re’s risk-adjusted capitalization remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR).
Also reflected in the ratings of BTG Re is the impact of the credit profile of BTG Pactual and the challenging but slowly improving macroeconomic environment in Brazil. The global COVID-19 pandemic stalled the economic recovery, and while new signs of a potential recovery are emerging, uncertainties regarding the fiscal situation persist, and growing inflation may affect economic stability in the country. BTG Pactual has shown consistent improvements in its results and credit strength, which can be seen in its Basel capital adequacy ratio; however, its ratings are limited by its domestic operating environment.
BTG Re maintains solid stand-alone attributes in terms of operating performance, including low loss and expense ratios, and strongest risk-adjusted capitalization, as measured by BCAR. BTG Re has been producing positive overall earnings since inception, driven by underwriting results and investment income. BTG Re also benefits from a solid retrocession program that mitigates its underwriting exposures; the company’s reinsurance retention remains low. AM Best’s credit analysis of BTG Re benefits from BTG Pactual’s expertise, stemming from its long track record with a portfolio of large companies.
Moreover, Brazil’s (re)insurance market is highly competitive with domestic and global reinsurers continuously accessing the market. BTG Re essentially acts as a captive reinsurer for its sister companies, Too Seguros S.A. (formerly known as Pan Seguros S.A.), and BTG Pactual Seguros S.A., which are 51% and 100% owned by BTG Pactual, respectively, and expands its product offerings in the local markets, as well as in other Latin America countries, each with their own market characteristics. In Brazil, the surety market continues to expand with growth anchored in the judicial bond segment, with the long-term perspective of performance bonds bringing incremental demand from much-needed infrastructure projects. More recently, Too Seguros S.A. started underwriting in the agricultural line of business, ceding it to BTG Re, which in turn cedes this business to market players.
AM Best continues to monitor BTG Re’s balance sheet strength—particularly the investment portfolio—operating performance, risk-adjusted capitalization and the execution of its product and geographic expansion, along with the credit profile of its parent.
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