Rating agency A.M. Best has upgraded the financial strength rating of Brazilian reinsurance firm IRB Brasil Resseguros S.A. to A (Excellent) from A- (Excellent), due to the company’s improved financial strength.
The reinsurer’s long-term issuer credit rating was also upgraded from “a-“ to “a”, and the outlook of its credit ratings was revised to stable from positive.
A.M. Best said that the ratings reflected IRB’s balance sheet strength, which it categorises as strongest, as well as its strong operating performance, neutral business profile, and appropriate enterprise risk management.
The upgrade was made to reflect continued improvement in IRB’s balance sheet strength, taking into account the meaningful dividend payout over the years, as well as the increased financial flexibility and stronger corporate governance after its initial public offering (IPO) on the Brazilian stock exchange in 2017.
However, A.M. Best noted that the macroeconomic environment in Brazil remains challenging, and there is growing uncertainty about the implementation of reforms to support economic growth in the country.
IRB experience some volatility in premium volume and underwriting results after Brazil opened its reinsurance market in 2007, but has since managed to reform a book of business that is consistently profitable and highly diversified, analysts said.
Despite a decrease in interest rates, IRB has also delivered strong investment returns that are substantially higher in Brazil relative to the standards of more developed markets, due to stronger yields.
Partially offsetting its positive rating factors is IRB’s exposure to concentration risk related to regulatory, macroeconomic and political dynamics, A.M. Best said, as well as its concentration of underwriting and investments within Brazil.
