AM Best Affirms Credit Ratings of Junto Resseguros S.A. and Junto Seguros S.A.

MEXICO CITY--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of “a” (Excellent) of Junto Resseguros S.A. (Junto Re) and Junto Seguros S.A. (Junto Seg) (collectively referred to as Junto). The outlook of these Credit Ratings (ratings) is stable. Both companies are domiciled in Brazil.

The ratings reflect Junto’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The stable outlooks reflect AM Best’s expectation that Junto will maintain its profitable operating performance contributing to its needed surplus growth to support an expanding book of business, while maintaining ongoing support from its parent, The Travelers Companies, Inc.

Junto Re is classified as a local reinsurer in Brazil, and mainly operates as a captive reinsurer for Junto Seg, an organization that has been writing surety directly for more than two decades. Junto Seg is the market-facing company of the group and the leading surety writer in Brazil. Both companies benefit operationally from their minority shareholder, Travelers Brazil Acquisition LLC (with a 49.5% ownership), which is owned ultimately by The Travelers Companies, Inc. These benefits include collaboration on ERM, employee development, retrocession placement, claims handling, business development and other operational functions. After a large return of an excess capital payment made to the parent companies, Junto continues to maintain modest underwriting leverage and strong liquidity metrics, with a comprehensive retrocession program, which provides additional capacity and reduces the company’s overall exposure. Junto is well positioned to benefit from growth opportunities in the segment, such as performance bonds.

Partially offsetting these positive rating factors is Junto’s concentration risk as a surety underwriter with business concentration in a single country. As a result, albeit not likely, restrictive regulatory changes could impair Junto’s ability to execute its strategy. Junto’s plan to mitigate this risk includes expansion into related lines of business in one of the biggest markets in Latin America through innovative distribution channels.

Junto’s strong operating performance results have formed a consistent improvement in its profitability over the last five years in its technical and non-technical accounts, supported by capital adequacy at the strongest levels. The high-interest rate environment in Brazil has aided Junto to increase its financial income and reaching record high levels in its return on equity.

Brazil’s surety (re)insurance market continues to be highly competitive, with homegrown and global (re)insurers vying for market share. With Brazil’s persistent economic volatility, and meaningful future growth uncertain, companies continue to seek international expansion, while keeping an eye on opportunities in the (re)insurance market. Surety has been one of the fastest-growing segments in the (re)insurance industry in Brazil.

Positive rating actions could take place if Junto’s business profile continues its improving trend, while maintaining its leading market position as the leader in its segment, underpinned by the continuous support of its shareholders. A factor that could lead to a negative rating action is the volatility in Brazil’s macroeconomic conditions, which could contribute to a deterioration of the company’s operating performance. Additionally, negative rating actions could happen if changes in the business environment impair Junto’s ability to implement its strategy, negatively affecting its business profile.

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

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