AUGUST 28, 2024 02:14 PM (EDT)

AM Best Affirms Credit Ratings of Active Capital Reinsurance, Ltd.

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MEXICO CITY - AUGUST 28, 2024 02:14 PM (EDT)
AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "a" (Excellent) of Active Capital Reinsurance, Ltd. (Active Re) (Barbados). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Active Re's balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The stable outlooks are based on the company's capability to maintain a sound operating performance driven by consistent underwriting practices and a solid capital structure.

Active Re's rating affirmations are due to its stable profitability metrics, supported by a keen underwriting strategy with constant adaptation to the economic environment and strong operating performance that compares favorably with its peers.

The company'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 supportive risk management framework for its risk profile. An offsetting rating factor is the strong competitive environment in Active Re's targeted 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 property/casualty (44%), surety (15%) and affinity (41%), at year-end 2023. 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 continues to adapt to the current economic environment by innovating its internal processes resulting in a better decision-making.

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 ratio of 1.4x. Nevertheless, Active Re's ratings could be susceptible to uncertainty over future underwriting performance, as the company expands its business into new geographic markets, automatic contracts and managing general agents.

While expanding its book of business in 2023, Active Re maintained its bottom-line results through contained acquisition expenses. The company has put greater emphasis on the quality of its underwriting allocating acquisition expenses to delegated underwriting authorities that have reported good technical results. As of June 2024, the company continues to report strong underwriting metrics in line with the performance of 2023.

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 are not foreseen in the medium term; however, these could occur if the company continues to strengthen its geographic profitability with positive effect in its balance sheet. Negative rating actions could result from deterioration in risk-adjusted capital due to major capital outflows.

The methodology used in determining these ratings is Best's Credit Rating Methodology (Version Jan. 18, 2024), which provides a comprehensive explanation of AM Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology .

Key insurance criteria reports utilized:

· Available Capital and Insurance Holding Company Analysis (Version Aug. 15, 2024)

· Catastrophe Analysis in AM Best Ratings (Version Feb. 8, 2024)

· Evaluating Country Risk (Version June 6, 2024)

· Scoring and Assessing Innovation (Version Feb. 27, 2023)

· Understanding Universal BCAR (Version Aug. 1, 2024)

View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, relevant sources of information and the frequency for updating ratings, please refer to Guide to Best's Credit Ratings.

· Previous Rating Date: Aug. 10, 2023

· Initial Rating Date: Jan. 13, 2014

· Date Range of Financial Data Used: Dec. 31, 2019-June 30, 2024

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