AM Best


AM Best Revises Outlooks to Negative for Reunion Re Compañia de Reaseguros S.A.


CONTACTS:

Salvador Smith
Senior Financial Analyst
+52 55 1102 2720, ext. 108
salvador.smith@ambest.com

Alfonso Novelo
Senior Director, Analytics
+52 55 1102 2720, ext. 107
alfonso.novelo@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Communications
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

MEXICO CITY - MAY 07, 2021 03:18 PM (EDT)
AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Reunion Re Compañia de Reaseguros S.A. (Reunion Re) (Argentina). The outlooks of these Credit Ratings (ratings) have been revised to negative from stable.

The ratings reflect Reunion Re’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The revision of the outlooks to negative from stable reflects pressure on Reunion Re’s balance sheet driven by a more challenging macroeconomic environment in Argentina and volatility in reinsurance recoverables.

Reunion Re’s balance sheet strength is underpinned by its risk-adjusted capitalization being at the very strong level, as measured by Best´s Capital Adequacy Ratio (BCAR). The ratings also reflect the company’s consistent profitability despite a volatile economic environment. Other positive rating factors include a well-structured and diversified reinsurance program, the company’s seasoned management team and synergies provided by its main shareholder. Partially offsetting these positive rating factors is the volatility in Reunion Re’s bottom-line results derived from operating in an economy with high inflation and currency volatility, exposure to capital controls, public debt restructuring and uncertainty from the COVID-19 global pandemic.

Reunion Re initiated operations in Buenos Aires, Argentina in 2012 and ranks among the country’s top reinsurance companies in terms of premium market share. The company operates through a network of brokers and direct distribution channels in Argentina, Paraguay, Guatemala, Bolivia and Ecuador.

Reunion Re’s risk-adjusted capitalization has been maintained at the very strong level and is supportive of its ratings. Historically, the company has increased capital at a 60% compound annual growth rate supported by

positive bottom-line results, driven by a consistent inflow of underwriting and investment income, which reflects the management team’s market knowledge and well-rounded experience in Argentina. A well-balanced reinsurance program placed among counterparties with a strong credit level also reinforces the company’s risk-adjusted capitalization and diminishes its credit risk exposure. In AM Best´s view, current capital levels could become pressured if the credit quality of Reunion Re’s investment portfolio further deteriorates given the prevailing macroeconomic uncertainty in Argentina. In addition, spikes in the volume of reinsurance recoverables have also pressured capital adequacy, which supports the current ratings.

In AM Best’s view, the reinsurer has shown disciplined underwriting in a highly volatile market that is driven by inflation and foreign exchange rate pressures. Reunion Re has managed to maintain overall profitability despite the negative effects derived from historic non-recurring adjustments in premium reporting, capital controls and public debt restructuring. By year-end 2020, the company sustained a return-on-equity of 7.3%, driven by contained underwriting expenses in conjunction with consistent investment results, supported by the company’s highly dollarized investment strategy.

Factors that could lead to negative rating actions include a deterioration of Reunion Re’s risk-adjusted capitalization to levels no longer supportive of its ratings in light of current macroeconomic risks, which in AM Best’s view could pressure Reunion Re’s balance sheet strength. Positive rating factors could result from improvements in Argentina’s country risk profile in combination with an enhancement in Reunion Re’s risk-adjusted capital.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of AM 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:


  • Available Capital & Holding Company Analysis (Version Oct. 13, 2017)

  • Catastrophe Analysis in AM Best Ratings (Version Oct. 13, 2017)

  • Evaluating Country Risk (Version Oct. 13, 2017)

  • Scoring and Assessing Innovation (Version March 5, 2020)

  • Understanding Universal BCAR (Version March 11, 2021)

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 Guide to Best’s Credit Ratings.


  • Previous Rating Date: April 8, 2020

  • Date Range of Financial Data Used: June 31, 2015-Dec. 31, 2020

This press release relates to rating(s) that have been published on AM Best’s website. For additional 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.

AM Best does not validate or certify the information provided by the client in order to issue a credit rating.

While the information obtained from the material source(s) is believed to be reliable, its accuracy is not guaranteed. AM Best does not audit the company’s financial records or statements, or otherwise independently verify the accuracy and reliability of the information; therefore, AM Best cannot attest as to the accuracy of the information provided.

AM Best’s credit ratings are independent and objective opinions, not statements of fact. AM Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. AM Best’s credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions. View our entire notice for complete details.

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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.


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AMB# Company Name
093637 Reunion Re Cia de Reas SA