AM Best Information Services




JUNE 02, 2016 12:47 PM (EDT)

A.M. Best Upgrades Ratings of Active Capital Reinsurance, Ltd.


CONTACTS:
 Elí Sánchez
Senior Financial Analyst
+52 55 1102 2720, ext. 108
eli.sanchez@ambest.com

Alfonso Novelo
Director, Analytics
+52 55 1102 2720, ext. 107
alfonso.novelo@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

MEXICO CITY - JUNE 02, 2016 12:47 PM (EDT)
A.M. Best has upgraded the financial strength rating to B++ (Good) from B+ (Good) and the issuer credit rating to “bbb+” from “bbb-” of Active Capital Reinsurance, Ltd. (AC Re) (Barbados). The outlook for each rating remains stable.

The upgrades reflect AC Re’s improved base capital, continuous profitable operating performance and implementation of an adequate risk management framework. The ratings also consider the company’s good risk- adjusted capitalization and adequate reinsurance program. The ratings are limited by AC Re’s increased acquisition costs and developing expansion strategy.

AC Re is a Barbados-based reinsurer established in 2007. The company operates mainly in the Latin American market with net premiums written comprised of fraud insurance (41%), credit (31.9%), property/casualty (20%) and surety (7%). The company has further diversified its geographic footprint in Central and South America and focused its underwriting efforts on short-term non-catastrophe risks.

AC Re maintains risk-adjusted capitalization levels that are supportive of current ratings. The company received its latest capital contribution in March 2016 of USD 4.6 million increasing its paid capital by 25.5% and further strengthening A.M. Best’s view on AC Re’s risk-adjusted capitalization, as measured by A.M .Best Capital Adequacy Ratio (BCAR). The company’s expansion strategy has been adequately reinforced by its reinsurance program, placed among a diversified group of reinsurers with good security levels, consequently minimizing counterparty credit risk exposures. Nevertheless, the ratings are limited by the uncertainty over future underwriting performance as the company expands its business into new markets.

In 2015, the company continued to post positive bottom line results, although on a lower scale compared with previous years, as the company faced higher acquisition expenses from expanding into new geographies and adjustments in the accounting treatment of acquisition expenses, ultimately resulting in a reduced, but still strong return on earned premium of 16%.

Chief among the improvements achieved in 2015 was the implementation of a formal enterprise risk management framework, as it has allowed AC Re to better identify and manage the risks it faces. As a result, related party transactions have been reduced significantly, improving its financial flexibility.

Positive rating actions could occur if the company continues to strengthen its capital adequacy position and successfully continues to grow with good operating performance. On the other hand, negative rating actions could result from deterioration of risk-adjusted capital due to an aggressive dividend policy or increased transactions with related parties, or from negative operating performance that renders the strategy and BCAR scores non-supportive of the ratings.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:


  • Catastrophe Analysis in A.M. Best Ratings

  • Evaluating Country Risk

  • Insurance Holding Company and Debt Ratings

  • Risk Management and the Rating Process for Insurance Companies

  • Understanding Universal BCAR

View a general description of the policies and procedures used to determine credit ratings. Also in accordance with Mexican regulations, the following is a link to required disclosures – A.M. Best America Latina Supplementary Disclosure.


  • Previous Rating Date: Feb. 11, 2015

  • Date of Financial Data Used: April 30, 2016

This press release relates to rating(s) that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page.

A.M. Best’s credit ratings are independent and objective opinions, not statements of fact. A.M. 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. A.M. 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.

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AMB# Company Name
093065 Active Capital Reinsurance, Ltd.