Esporte AM Best Removes from Under Review with Negative Implications and Affirms Credit Ratings of IRB-Brasil Resseguros S.A.
OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of IRB-Brasil Resseguros S.A. (IRB) (Brazil). The outlook assigned to these Credit Ratings (ratings) is negative.
The ratings reflect IRB’s balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, neutral business profile and marginal enterprise risk management (ERM).
The ratings also reflect AM Best’s view of IRB’s operating performance, recently impacted by prior-year reserve development from natural catastrophe events, and losses from the life reinsurance line of business, which required the company to restate its 2018 and 2019 financial statements, as well as the COVID-19 pandemic. If results continue to be impacted negatively and reserves continue to develop adversely in the near term, AM Best sees the potential for IRB’s operating performance and balance sheet strength to deteriorate. While AM Best acknowledges the recent improvements in the company’s ERM, IRB is still under special regulatory inspection by the Superintendência de Seguros Privados (SUSEP), the Brazilian (re)insurance industry regulatory authority. It is AM Best’s view that after the resolution of the regulatory supervision, the company’s ERM still will need to be tested and evaluated over a longer period before it can be considered appropriate given IRB’s business profile.
AM Best acknowledges that strategic changes are being made in IRB’s underwriting practices, which have the potential to reduce operational volatility and restore profitability after the Jan. 1, 2021, renewals. Nonetheless, IRB’s operating performance compares favorably with its peers when considered on a five-year average.
The negative outlooks reflect AM Best’s concerns of continued pressure on the company’s operating performance and profitability, as well as balance sheet strength over the intermediate term. While the company continues to execute a viable turnaround strategy, IRB faces instability in its operating results stemming from certain lines of business and prior-year reserve development, creating heightened execution risk.
Factors that could cause negative rating actions are material deterioration of its balance sheet strength or operating performance; in particular continued adverse prior-year reserve development or unprofitable underwriting. AM Best believes that the company is appropriately rated at this time and does not see any positive movement in the short to near term.
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.
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