OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Rating of “aa” (Superior) of Assured Guaranty Re Overseas Ltd. (AGRO) (Bermuda). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect AGRO’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).
AGRO’s risk-adjusted capital, as measured by Best’s Capital Adequacy Ratio (BCAR), is currently and projected by AM Best to be at the strongest level over the next year. Shareholders’ equity of AGRO has been stable in the past few years, and is forecast to grow steadily in the forecast years. The company’s strong liquidity position, conservative investment portfolio and well-positioned financial flexibility due to its affiliation with Assured Guaranty Re Ltd., the indirect parent, and Assured Guaranty Ltd. (AGL), the ultimate parent, as well as AGRO’s active capital management, provide support for the balance sheet assessment of strongest.
AM Best assesses AGRO’s operating performance as adequate based on its operating results, which have been driven primarily by investment income. Recent two-year loss ratios have increased to a great extent, compared with the prior few years’ low loss ratios, mainly as a result of the increased losses and decreased earned premiums from the aircraft residual value insurance (RVI) business, which has been impacted heavily by the low activity in the aviation industry affected by the COVID-19 pandemic. AGRO’s expense ratios in 2020 and 2021 have been hampered by the increase in expenses and decrease in earned premiums. The high combined ratio has affected AGRO’s current overall operating performance. AGRO has low net returns on equity due to its underutilization of capital, and the opportunistic deployment of capital to new non-financial guaranty business.
AM Best assesses AGRO’s business profile as neutral. The company’s life financial reinsurance program continues to exhibit risk profiles with very low loss probability. AGRO’s aircraft RVI program was suspended since 2020 due to COVID-19 pandemic, and AM Best does not expect it to resume until the international travel is opened fully. AGRO has limited competition with minimal number of players in these lines of business segments. AGRO actively seeks for opportunistic growth in non-financial guaranty business, not to chase premium growth.
AGRO’s overall ERM assessment is appropriate, as the company employs a robust ERM framework and infrastructure embedded across the AGL group of companies, of which AGRO is a member. AM Best considers AGRO’s risk assessment capabilities to be aligned appropriately with its risk profile.
The ratings also take into consideration the benefits and support AGRO receives from the AGL group of companies — a broader, successful franchise — and its importance to AGL’s overall business strategy and profile.
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