AM Best Affirms Credit Ratings of Reunion Re Compañia de Reaseguros S.A.
10 July 2024 - 7:56PM
Business Wire
AM Best has affirmed the Financial Strength Rating of B++
(Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of
Reunion Re Compañia de Reaseguros S.A. (Reunion Re) (Argentina).
The outlook of these Credit Ratings (ratings) is stable.
These ratings reflect Reunion 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.
Reunion Re’s balance sheet strength remains underpinned by its
risk-adjusted capitalization being at the strongest level, as
measured by Best´s Capital Adequacy Ratio (BCAR). The ratings also
reflect the company’s consistent profitability despite a volatile
economic environment. Other positive rating factors include the
company’s well-structured and diversified reinsurance program, its
seasoned management team and synergies provided by its main
shareholder. Partially offsetting these positive rating factors is
the historic volatility in Reunion Re’s bottom line results due to
operating in Argentina´s challenging macroeconomic environment and
fluctuations in the company´s retrocession leverage stemming from
reinsurance recoverables and ceded premium. Reunion Re initiated
operations in Bueno Aires, Argentina in 2012, and ranks among the
country’s top reinsurance companies based on premium market share.
The company operates through a network of brokers and direct
distribution channels mainly in Argentina, but also has a presence
in South and Central America.
Historically, the company has increased capital at a 70%
compound annual growth rate supported by positive bottom-line
results; this is 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
credit quality level also reinforces the company’s risk-adjusted
capitalization and diminishes its credit risk exposure. In AM
Best´s view, current capital levels are pressured by the credit
quality of Reunion Re´s investment portfolio given the prevailing
macroeconomic uncertainty. In addition, spikes in the volume of
reinsurance recoverables and ceded premium also pressure the
company’s capital adequacy, which underly its current ratings.
In AM Best’s view, the reinsurer has shown disciplined
underwriting in a highly volatile market that is driven by
inflation and foreign exchange rate pressures. Historically,
Reunion Re has managed to maintain overall profitability despite
the negative effects derived from non-recurring adjustments in
premium reporting, capital controls and public debt restructuring.
By year-end 2022, the company reported negative bottom line
results, mainly driven by investment losses that affected the
overall insurance industry that resulted from the spread between
high inflation and currency devaluation rates. Nonetheless, Reunion
Re recovered in 2023, supported by underwriting profits and
reflected in a 95.7% combined ratio, in conjunction with a 6.2%
investment yield. AM Best expects an improvement trend in financial
products to be maintained as Argentina’s central bank (BCRA)
accelerates the peso’s devaluation as a hedge against
inflation.
Factors that could lead to negative rating actions include a
deterioration in Reunion Re’s risk-adjusted capitalization to a
level that no longer supports the ratings under current
macroeconomic risks, which could pressure AM Best’s view of the
company’s balance sheet strength level. Additionally, aggressive
premium growth resulting from the company’s geographic expansion
that pressures capital and operating performance to a level that no
longer supports the assessment could also lead to negative rating
actions. While highly unlikely, positive rating actions could occur
if capital base expands to levels supportive of a strongest balance
sheet strength assessment.
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 Guide to Best’s Credit Ratings. For information
on the proper use of Best’s Credit Ratings, Best’s Performance
Assessments, Best’s Preliminary Credit Assessments and AM Best
press releases, please view Guide to Proper Use of Best’s
Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
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Salvador Smith Senior Financial Analyst +52 55
9085 7506 salvador.smith@ambest.com Alfonso Novelo
Senior Director, Analytics +52 55 9085 7501
alfonso.novelo@ambest.com Christopher Sharkey Associate
Director, Public Relations +1 908 882 2310
christopher.sharkey@ambest.com Al Slavin Senior Public
Relations Specialist +1 908 882 2318
al.slavin@ambest.com