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Best’s News & Research Service - May 15, 2024 04:54 PM (EDT)

AM Best Affirms Credit Ratings of Austral Participações S.A. and Its Subsidiaries

  • May 15, 2024 04:54 PM (EDT)
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//BestWire// - AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” (Excellent) of Austral Resseguradora S.A. (Austral Re) and Austral Seguradora S.A. Concurrently, AM Best has affirmed the Long-Term ICR of “bb+” (Fair) of Austral Participações S.A. (Austral). The outlook of these Credit Ratings (ratings) is stable. All companies are domiciled in Brazil, and collectively are referred to as Austral.

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

The stable outlooks are underpinned by AM Best’s expectation that Austral’s balance sheet strength assessment will remain at the strongest level, supported by internal capital generation and improved risk modeling. At year-end 2023, Austral continued to show a solid capital structure as shown in its risk-adjusted capitalization assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), coupled with positive bottom line and technical results for each of its subsidiaries.

Additionally, Austral maintains a retrocession program with highly rated counterparties as it remains dependent on reinsurance to provide additional market capacity. AM Best expects that Brazil's double-digit interest rate environment will continue to increase the contribution of Austral’s investment income to its operating results, compared with recent years, potentially helping surplus growth. While a high interest rate environment generally can be viewed as positive, AM Best recognizes that the high market reference rates are a consequence of the inflationary environment; however, the higher rates also contributed to the easing of inflation-related pressures at year-end 2022 and 2023, and overall, did not affect the group’s performance.

AM Best views Austral’s business profile as neutral while recognizing the group’s successful efforts to create a more-diversified book of business and better geographic spread of risk over time. Austral continues to grow amid macroeconomic challenges while building its presence in the wider Latin America (re)insurance market, predominantly writing energy, surety and financial guarantee, commercial property/casualty, marine, aviation and transportation, life and liability (re)insurance lines of business for the large- and medium-sized commercial segment.

Partially offsetting these positive rating factors is Brazil’s highly competitive (re)insurance market as homegrown and global (re)insurers compete for market share. In addition, Austral must continue to weather the negative impact of catastrophic events that took place during 2023 such as Hurricane Otis. As of May 2024, the group expects to overcome the floods that took place in Rio Grande do Sul supported by its prudent retrocession program put in place with highly rated reinsures.

Negative rating actions could take place if risk-adjusted capitalization experiences adverse impact from recent portfolio changes. While positive rating actions are unforeseen in the short term, a positive impact on the ratings could take place in the medium term if the operating performance of the company continues to strengthen and reduce its volatility.

The methodology used in determining these ratings is Best’s Credit Rating Methodology (Version Jan. 18, 2024), which provides a comprehensive explanation of AM Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at

Key insurance criteria reports utilized:

  • Evaluating Country Risk (Version May 4, 2023)

  • Understanding Global BCAR (Version March 7, 2024)

  • Catastrophe Analysis in AM Best Ratings (Version Feb. 8, 2024)

  • Available Capital and Insurance Holding Company Analysis (Version Jan. 18, 2024)

  • Rating Surety Companies (Version April 25, 2024)

  • Scoring and Assessing Innovation (Version Feb. 27, 2023)

View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, relevant sources of information and the frequency for updating ratings, please refer to Guide to Best’s Credit Ratings.

  • Previous Rating Date: April 28, 2023

  • Initial Rating Date:  Feb. 26, 2021

  • Date Range of Financial Data Used: Dec. 31, 2018-Dec. 31, 2023

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to rating(s) that have been published on AM Best's website. For additional 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.

If the ratings referred in this press release do not indicate a specific country suffix, it is understood that they are granted globally and not on a national scale.

AM Best does not validate or certify the information provided by the client in order to issue a credit rating.

While the information obtained from the material source(s) is believed to be reliable, its accuracy is not guaranteed. AM Best does not audit the company’s financial records or statements, or otherwise independently verify the accuracy and reliability of the information; therefore, AM Best cannot attest as to the accuracy of the information provided.  

AM Best’s credit ratings are independent and objective opinions, not statements of fact. AM Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. AM Best’s credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions. View our entire notice for complete details.

AM Best receives compensation for interactive rating services provided to organizations that it rates. AM Best may also receive compensation from rated entities for non-rating related services or products offered by AM Best. AM Best does not offer consulting or advisory services. AM Best keeps certain activities of its business units separate from each other to preserve the independence and objectivity of their respective activities. As a result, certain business units of AM Best may have information that is not available to other AM Best business units. AM Best has established policies and procedures to maintain the confidentiality of certain confidential (non-public) information received in connection with each analytical process. For more information regarding AM Best’s rating process, including handling of confidential (non-public) information, independence, and avoidance of conflicts of interest, please read the AM Best Code of Conduct. 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. 

International South America Latin America Press Release Brazil Best's Credit Rating Action

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