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Best’s News & Research Service - February 06, 2020 03:02 PM (EST)

AM Best Removes From Under Review and Affirms Credit Ratings of Austral Resseguradora S.A. and Austral Seguradora S.A.

  • February 06, 2020 03:02 PM (EST)
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Oldwick //BestWire// - AM Best has removed from under review with developing implications and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Ratings of “bbb+” of Austral Resseguradora S.A. (Austral Re) and Austral Seguradora S.A. The outlook assigned to these Credit Ratings (ratings) is positive. Both companies are domiciled in Brazil, and collectively are referred to as Austral.

The ratings reflect Austral’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.

The positive outlooks reflect AM Best’s improving view of Austral’s balance sheet strength. This is reflected in Austral’s risk-adjusted capitalization, as measured by the Best’s Capital Adequacy Ratio (BCAR), which is currently assessed at the strongest level, as well as the expectation that risk-adjusted capitalization will improve as Austral reduces its catastrophic exposures over the next year. Additionally, Austral has had steady surplus appreciation and maintains a solid retrocession program with highly rated counterparties as it remains dependent on reinsurance to provide additional market capacity.

AM Best views Austral’s business profile as neutral; however, Austral Re’s acquisition of Terra Brasis Resseguros has helped to create a more diversified book of business and better geographic spread of risk. Austral continues to build its presence in the wider Latin American (re)insurance market, predominately writing surety and financial guarantee, oil and gas, commercial property, marine, aviation and transportation, life and agriculture (re)insurance lines of business.

Partially offsetting these positive rating factors is Brazil’s highly competitive (re)insurance market as homegrown and global (re)insurers continue to compete for market share. In addition to that, Austral also must weather the still significant macroeconomic challenges, albeit somewhat milder compared with recent years, in Brazil over the short and medium term.

Positive rating actions could follow if Austral successfully implements its post-Terra Brasis Resseguros acquisition business plan while maintaining or improving its risk-adjusted capitalization and long-term underwriting performance. Negative rating actions could take place if the group’s operating performance or risk-adjusted capitalization shows adverse impact from the new business plan.

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 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.

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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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