A.M. Best has upgraded the Financial Strength Rating to B++ (Good) from B+ (Good) and the Long-Term Issuer Credit Rating to “bbb” from “bbb-” of BTG Pactual Resseguradora S.A. (BTG Re) (Brazil). The outlook of these Credit Ratings (ratings) has been revised to stable from negative.
The ratings reflect BTG Re’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
BTG Re is a local reinsurer in Brazil, operating in the surety segment with plans to expand geographically and by line of business. The company’s parent, Banco BTG Pactual S.A. (BTG Pactual), has provided capital support, as well as operational and risk management capabilities.
Also reflected in the ratings is the impact of the credit profile of BTG Pactual and the still challenging but improving macroeconomic and (re)insurance conditions experienced in Brazil. The credit profile of BTG Pactual has stabilized, and A.M. Best believes that a potential adverse impact on BTG Re’s operations is now more remote. Additionally, BTG Re maintains solid stand-alone attributes in terms of operating performance and risk-adjusted capitalization. BTG Re has been able to produce positive overall earnings since inception, driven by investment income and complemented by underwriting results. BTG Re also benefits from a solid retrocession program that mitigates much of its underwriting exposures.
Furthermore, Brazil’s (re)insurance market is highly competitive with domestic and global reinsurers continuing to enter the market. BTG Re, which essentially acts as a captive reinsurer for its sister company, Pan Seguros S.A. (51% owned by BTG Pactual), has begun to develop and expand its product offerings in its local markets, as well as in other Latin America territories, each with their own market characteristics.
A.M. Best will continue to monitor BTG Re’s operating performance, risk-adjusted capitalization and the execution of its product and geographic expansion, in addition to the credit profile of its parent.
The key rating driver that could lead to a positive rating action in BTG Re’s ratings is the continued improvement of the credit profile of its parent company, BTG Pactual.
Factors that could negatively impact its ratings are the deterioration of its parent’s credit profile or liquidity position, or a decline in the risk-adjusted capitalization or the operating performance of BTG Re.
