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MEXICO CITY–(BUSINESS WIRE)–optimal Reunion Re Compañía of Reaseguros SA (Reunion Re) (Argentina) has affirmed its Financial Strength Rating (FSR) of B++ (Good) and its Long-Term Issuer Credit Rating (ICR) of ‘bbb’ (Good). The outlook for these credit ratings is stable.
Reunion Re’s ratings reflect its balance sheet strength, assessed as very strong by AM Best, as well as its adequate operating performance, neutral business profile and appropriate overall risk management.
Reunion Re’s balance sheet strength continues to be supported by the strongest level of risk-adjusted capital, based on the Best Capital Adequacy Ratio (BCAR). The rating also reflects its continued profitability despite a volatile economic environment. Other positive rating factors include a well-structured and diversified reinsurance program, an experienced management team, and synergies provided by the largest shareholder. This positive rating factor is partially offset by volatility in Reunion Re’s results, which is caused by operating in a challenging macroeconomic environment in Argentina, and fluctuations in the company’s retrocession leverage from reinsurance and ceded premium recovery.
Reunion Re started operations in Buenos Aires, Argentina in 2012 and is one of the leading reinsurers in terms of premium market share. The company operates primarily through its agency network and direct distribution channels in Argentina, with operations in South and Central America.
Historically, the company has grown its capital at a CAGR of 70%, driven by sustained subscription and financial product income, reflecting its management team’s deep experience and understanding of the Argentine market. Its well-balanced reinsurance program, with reinsurers of higher credit quality, also supports its risk-adjusted capitalization and helps reduce its credit risk exposure. AM Best believes that the current capital level is under pressure from the credit quality of Reunion Reinsurance’s investment portfolio, given the prevailing macroeconomic uncertainty in the country. In addition, a surge in reinsurance recoveries and ceded premiums also put pressure on capital adequacy ratios, which underpin the current rating.
AM Best believes that the reinsurer has demonstrated strict underwriting capabilities in a highly volatile market driven by inflation and exchange rate pressures. Historically, Reunion Re has managed to maintain profitability despite the negative impact of premium reporting, capital controls and non-recurring adjustments to public debt restructuring. At the end of 2022, the company recorded negative results, mainly due to losses on financial products that affected the insurance industry and the difference between high inflation rates and the depreciation of the peso. However, supported by subscription profits, Reunion Re recovered in 2023 with a combined ratio of 95.7% and a return on investment of 6.2%. AM Best expects the Central Bank of Argentina (BCRA) to accelerate the depreciation of the peso as a hedge against inflation, thereby maintaining the trend of improving financial products.
Factors that could lead to negative rating action include a deterioration in its risk-adjusted capital position to levels that do not support the ratings given ongoing macroeconomic risks, which could weigh on AM Best’s view of Reunion Re’s balance sheet strength. In addition, significant premium growth. The company’s geographic expansion puts pressure on capital and its operating results to levels that do not support the ratings, which could also lead to negative rating action. Although unlikely, positive rating action could occur if its capital base expands to levels that support the strongest balance sheet strength.
This press release refers to the ratings published on the AM Best website. For all other rating information relating to the relevant release and dissemination, including details of the office responsible for issuing each individual rating mentioned in this press release, please consult the website: Press release Author: AM Best. For more information on the use and limitations of credit rating opinions, see Best Credit Score GuideFor more information on the proper use of Best Credit Ratings, Best Performance Assessments, Best Initial Credit Assessments and AM Best news releases, visit Guidelines for the appropriate use of best ratings and reviews.
AM Best is a global credit rating agency, news and data provider specializing in the insurance industry. Headquartered in the United States, the company operates in more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, www.ambest.com.
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Contact information
Salvador Smith
Senior Financial Analyst
+52 55 9085 7506
(email protected)
Alfonso Novello
Director of Advanced Analytics
+52 55 9085 7501
(email protected)
Christopher Sharkey
Deputy Director of Public Relations
+1 908 882 2310
(email protected)
Al Slavin
Senior Public Relations Strategist
+1 908 882 2318
(email protected)
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