BTG Pactual Resseguradora S.A. gets a revised positive rating from AM Best. The rating company has revised the Long-Term Issuer Credit Rating (Long-Term ICR) outlook to positive from stable and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb” (Good). The outlook of the FSR is stable.
The ratings reflect BTG Re’s balance sheet strength which has been assessed as very strong, along with its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The revised rating reflects AM Best’s expectation that BTG Re will maintain the strongest balance sheet assessment over the intermediate term, as the holding company’s corporate governance continues to evolve.
BTG Re is a local reinsurer in Brazil, operating predominantly in the surety segment in Latin America, and recently, in Portugal and Spain, as part of a fronting agreement. BTG Re has recently assumed control of the agricultural line of business from its sister primary company, TOO Seguros S.A. The company’s parent, Banco BTG Pactual S.A., provides operational support and risk management capabilities and would be able to provide liquidity if needed.
In the last two years, BTG Re entered into two significant loss portfolio transfers, which increased the size of its balance sheet materially. The management has represented these transactions as opportunistic while the company’s focus remains unchanged.
The loss portfolio transfers expired and completely ran off by the end of 2022, with the company’s risk-adjusted capitalization remaining at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR).
The impact of BTG Pactual’s credit profile and the challenging and volatile macroeconomic and political environment in Brazil continue to hamper meaningful recovery and stability in the country. This is reflected in the ratings assessment as well. While Brazil has recovered from the COVID-19 pandemic, uncertainties regarding the fiscal situation persist, aggravated by volatility in inflation and interest rates.
BTG Pactual has consistently improved its results and credit strength while expanding and diversifying its operations; however, BTG Re’s ratings are somewhat limited by its domestic operating environment.
It maintains solid standalone attributes in terms of operating performance, including low loss and expense ratios, and the strongest level of risk-adjusted capitalization, as measured by BCAR. Driven by underwriting results and investment income, BTG Re has produced positive earnings since its inception. BTG Re also benefits from a solid retrocession program that mitigates its underwriting exposures; the company’s reinsurance retention remains low.
AM Best’s analysis of BTG Re benefits from BTG Pactual’s expertise, stemming from its long track record with a portfolio of large companies.
