AM Best Upgrades Issuer Credit Rating of Austral Participações S.A., Affirms Credit Ratings of Subsidiaries
September 13 2024 - 2:02PM
Business Wire
AM Best has upgraded the Long-Term Issuer Credit Rating
(Long-Term ICR) to “bbb-” (Good) from “bb+” (Fair) of Austral
Participações S.A. (Austral). Concurrently, AM Best has affirmed
the Financial Strength Rating of A- (Excellent) and the Long-Term
ICRs of “a-” (Excellent) of Austral Resseguradora S.A. (Austral Re)
and Austral Seguradora S.A. The outlook of these Credit Ratings
(ratings) is stable. All companies are domiciled in Brazil and
collectively referred to as Austral.
The ratings reflect Austral’s balance sheet strength, which AM
Best assesses at the strongest level, 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.
Due to the most recent update of AM Best’s Transfer and
Convertibility Ceilings, Austral’s Long-Term ICR has been upgraded
to match the current level of Brazil. As of June 2024, Austral
continued to show a solid capital structure as shown in its
risk-adjusted capitalization being 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. Austral has done this by 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 domestic 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 Austral’s
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.
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 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. For more information,
visit www.ambest.com.
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Ricardo Rodríguez Financial Analyst +52 55 9085
2708 ricardo.rodriguez@ambest.com
Alfonso Novelo Senior Director, Analytics +52
55 9085 7501 alfonso.novelo@ambest.com
Christopher Sharkey Associate Director, Public
Relations +1 908 882 2310
christopher.sharkey@ambest.com
Al Slavin Senior Public Relations Specialist +1
908 882 2318 al.slavin@ambest.com