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FOR IMMEDIATE RELEASE
OLDWICK - AUGUST 07, 2020 01:27 PM (EDT)
AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” of Junto Resseguros S.A. (Junto Re) and Junto Seguros S.A. (Junto Seg) (collectively referred to as Junto). The outlook of these Credit Ratings (ratings) is stable. Both companies are domiciled in Brazil.
The ratings reflect Junto’s balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
Junto Re is classified as a local reinsurer in Brazil and mainly operates as a captive reinsurer for Junto Seg, an organization that has been writing surety directly for more than two decades. Junto Seg is the market-facing company of the group and one of the leading surety writers in Brazil. Junto benefits operationally from its minority shareholder, Travelers Brazil Acquisition LLC (with a 49.5% ownership), which is ultimately owned by The Travelers Companies, Inc. These benefits include collaboration on ERM, employee development, retrocession placement, claims handling, business development and other operational functions. Junto maintains low underwriting leverage and strong liquidity metrics, with a comprehensive retrocession program that provides additional capacity and reduces the company’s overall exposure.
Partially offsetting these positive rating factors is Junto’s concentration risk as essentially a monoline surety writer with business concentration in a single country. Junto’s future plans to mitigate this risk include expansion into related lines of business. Junto also executed a capital reduction and increased dividend payments to reduce the level of its surplus and optimize its capital structure. This did not result in a significant decrease in risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as the company’s net premiums written were significantly lower in 2019. Going forward, if net premiums resume growth, the risk-adjusted capitalization could be affected negatively if there is not a corresponding increase in capital.
Additionally, Brazil’s (re)insurance market continues to be highly competitive, with homegrown and global (re)insurers vying for market share. With Brazil’s economy showing a meaningful downturn caused by the COVID-19 pandemic, companies continue to seek international expansion while keeping an eye on opportunities in the (re)insurance market. Surety has been one of the fastest-growing segments in the (re)insurance industry in Brazil.
Positive rating triggers include a successful long-term execution of the group’s growth and diversification strategy and consistent operating performance, along with sustained and robust risk-adjusted capitalization. Negative rating triggers include a deterioration in either operating results or risk-adjusted capitalization, the inability to execute its growth and diversification strategy, a continued weakness in Brazil’s economy or a downgrade in Brazil’s country risk tier.
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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.