AM Best Revises Outlooks to Positive for Active Capital Reinsurance, Ltd.
MEXICO CITY–(BUSINESS WIRE)–#insurance—AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Active Capital Reinsurance, Ltd. (Active Re) (Barbados).
The Credit Ratings (ratings) reflect Active 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 (ERM).
The revision of the outlooks to positive reflects AM Best’s favorable view over Active Re’s operating performance, amid its continuous global expansion, supported by consistent sound underwriting practices comparing strongly with competitors despite a challenging operating environment driven by the COVID-19 pandemic.
Active Re’s balance sheet strength is underpinned by its risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The ratings also reflect Active Re’s adequate reinsurance program and a supporting risk management framework for its risk profile. An offsetting rating factor is the strong competitive environment in its target geographic markets, which the company faces through its global expansion.
Active Re is a Barbados-based reinsurer established in 2007. The company operates with net premiums written (NPW) composed of affinity (46%), property/casualty (44%) and surety (10%), as of 2020. The company has a diversified geographic footprint in Latin America, the Middle East, Europe and Asia Pacific, and focuses its underwriting efforts on short-term non-catastrophe risks.
The company’s capital base, consistently grown through reinvestment of earnings and capital contributions, has helped maintain Active Re’s risk-adjusted capitalization at the strongest level. The company’s expansion strategy continues to be reinforced adequately through consistent improvements to its reinsurance program, placed among a diversified group of reinsurers with good security levels, consequently minimizing counterparty credit risk exposures. Moreover, the company is characterized by a conservative underwriting leverage as reflected by an NPW to surplus of 0.98x. Nevertheless, Active Re’s ratings could be susceptible to uncertainty over future underwriting performance, as the company expands its business into new geographic markets.
In 2020, while expanding into new geographies, Active Re continued to maintain its bottom-line results through contained acquisition expenses derived from its affinity line of business and continued operating efficiencies, enabled for the most part by managing general agents. Despite increased claims expenses mainly triggered by catastrophe events in the Middle East and the impact of the COVID-19 pandemic in Latin America, AC Re has continued to maintain profitability as reflected by a return on earned premium and return on equity of 19% and 21%, respectively.
The continuous improvement in Active Re’s ERM framework has allowed the company to better identify and manage its risks. As a result, related party transactions continue to be reduced significantly, improving its financial flexibility.
Positive rating actions could occur if the company continues to enhance its operating performance. Conversely, negative rating actions could result from deterioration in Active Re’s risk-adjusted capital due to an aggressive dividend policy or deterioration in underwriting principles.
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 London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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