SEPTEMBER 14, 2017 03:37 PM (EDT)
A.M. Best Affirms Credit Ratings of Active Capital Reinsurance, Ltd.
Associate Financial Analyst
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Senior Director, Analytics
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FOR IMMEDIATE RELEASE
MEXICO CITY - SEPTEMBER 14, 2017 03:37 PM (EDT)
A.M. Best has affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb+” of Active Capital Reinsurance, Ltd. (AC Re) (Barbados). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect AC Re’s good risk- adjusted capitalization, continuous profitable operating performance, adequate reinsurance program and risk management framework, as well as the company´s shift towards stable acquisition costs. Offsetting rating factor are AC Re’s developing expansion strategy and the strong competitive environment in its target geographic markets.
AC Re is a Barbados-based reinsurer established in 2007. The company operates mainly in the Latin America market with net premiums written comprised of credit insurance (48.3%), surety (25.3%), fraud insurance (20.8%), and property/casualty (5.6%). The company has continued to further diversify 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 the current ratings. The company increased its paid capital by 66% in 2016, which coupled with a prudent dividends policy, further strengthened A.M. Best’s view on AC Re’s risk-adjusted capitalization, as measured by Best’s 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 geographic markets.
In 2016, the company continued to post positive bottom line results, although on a lower scale compared with previous years, as the company faced higher claims expenses derived from its affinity line of business. However, while expanding into new geographies, AC Re managed to further diminish acquisition expenses, ultimately resulting in a return on earned premium of 14.2%.
The continuous improvement in the company´s enterprise risk management framework has allowed AC Re to better identify and manage its risks. As a result, related party transactions continue to be 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. Conversely, negative rating actions could result from deterioration in 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 model 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:
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, please refer to Understanding Best’s Credit Ratings.
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