MEXICO CITY--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent), the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” (Excellent) and the Mexico National Scale Rating of “aaa.MX” (Exceptional) of Reaseguradora Patria, S.A. (Patria Re) (Mexico). AM Best also has affirmed the Long-Term ICR of “bbb” (Good) of Patria Re’s ultimate parent, Peña Verde, S.A.B. (Peña Verde) (Mexico). The outlook of these Credit Ratings (ratings) is stable. Per AM Best’s criteria procedure on insurance holding companies, Peña Verde’s rating reflects a standard notching from Patria Re’s Long-Term ICR.
The ratings reflect Patria Re’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The stable outlooks reflect Patria Re’s ability to maintain stable profitability metrics along with a strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), while implementing its business expansion strategy.
Patria Re’s balance sheet assessment of strongest is supported by that same assessment on the company’s level of risk-adjusted capitalization, low underwriting leverage, a robust reinsurance program and strong liquidity metrics. The ratings also reflect its comprehensive ERM infrastructure and expansive knowledge of its core markets in Latin America, which reflects the company’s smooth implementation of its expansion strategy with a stable overseas operation outside its niche market.
Patria Re has established a solid niche position in Mexico and in other Latin America markets, which allows it to accept profitable business selectively while maintaining a diversified product portfolio tailored to specific markets. This strategy has resulted in consistently favorable underwriting results over the years and has contributed to Patria Re’s enhanced level of risk-adjusted capitalization. A well-balanced reinsurance program placed among counterparties with a strong security level also reinforces the company’s risk-adjusted capitalization.
Despite limitations posted by catastrophe reserve development, Patria Re reported positive bottom-line results in 2023, mainly driven by favorable underwriting results. The company’s strong underwriting practices allowed Patria Re to absorb the impact of Hurricane Otis without significant increases in its loss ratio and maintain good levels of premium sufficiency during 2023. Their efforts to maintain stable claims and management expenses have resulted in a profitable first six months for 2024; however, it remains limited by catastrophe reserve development.
Factors that could lead to positive rating actions for the company include a consistent improvement in profitability metrics, while maintaining its strongest level of risk-adjusted capitalization, as well as the continued and successful operation of its overseas expansion. Factors that may lead to negative rating actions include a sustained decline in profitability, as well as a significant deterioration in risk-adjusted capitalization, driven either by unfavorable results or a significant cash withdrawal.
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