AM Best Affirms Credit Ratings of BTG Pactual Resseguradora S.A.

AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of BTG Pactual Resseguradora S.A. (BTG Re) (Brazil). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect BTG Re’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

BTG Re is a local reinsurer in Brazil, operating predominantly in the surety segment in Brazil, Latin America, and recently, in Portugal and Spain, as part of a fronting agreement. Also recent is the agricultural line of business, which BTG Re assumes from its sister primary company, Too Seguros. The company’s parent, Banco BTG Pactual S.A. (BTG Pactual) [B3: BPAC11], 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 materially increased the size of its balance sheet. BTG Re’s management has represented that these transactions were opportunistic and the company’s focus remains unchanged. These loss portfolio transfers are expected to expire and completely run off by the end of 2022. BTG Re’s risk-adjusted capitalization remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR).

Also reflected in the ratings of BTG Re is the impact of the credit profile of BTG Pactual and the challenging and volatile macroeconomic and political environment in Brazil, which continues to hamper meaningful recovery and stability in the country. While the country has recovered from the pandemic, uncertainties regarding the fiscal situation persist, aggravated by inflation and high interest rates. BTG Pactual has shown consistent improvement in its results and credit strength while expanding and diversifying its operations; however, BTG Re’s ratings are somewhat limited by its domestic operating environment.

BTG Re 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. BTG Re has produced positive earnings since inception, driven by underwriting results and investment income. 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.

AM Best continues to monitor BTG Re’s balance sheet strength—particularly the investment portfolio—operating performance, risk-adjusted capitalization and the execution of its product and geographic expansion, along with the credit profile of its parent.

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 use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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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