AM Best Affirms Credit Ratings of Patria Re (US), Inc.

NOVEMBER 08, 2024 12:57 PM (EST)

AM Best Affirms Credit Ratings of Patria Re (US), Inc.

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FOR IMMEDIATE RELEASE

MEXICO CITY - NOVEMBER 08, 2024 12:57 PM (EST)
AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of "bbb+" (Good) of Patria Re (US), Inc. (Patria US) (Charleston, SC). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Patria US' balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The ratings also recognize Patria US' affiliation and strategic importance to its ultimate parent, Peña Verde, S.A.B. (Peña Verde), a leading group in Mexico's insurance and reinsurance industries, which provides synergies and operating efficiencies. The ratings also reflect the support received from its sister company, Reaseguradora Patria, S.A. (Patria Re), the lead company of the Peña Verde group and a well-known reinsurer in Latin America. As of June 2024, Peña Verde had equity of USD 744 million and premiums of USD 464 million. Patria US is considered a new company formation as it began operations in February of 2023, after receiving authorization in the United States from the South Carolina Department of Insurance. The company was created and is domiciled in South Carolina, as part of Peña Verde's efforts to expand and strengthen its operations.

AM Best considers Patria US's balance sheet strength to be at the very strong level, with its capital base expected to strengthen under capital contributions planned for the upcoming years. The latest capital contribution took place in September, in which Patria US received USD 8.5 million from its parent company. AM Best will monitor the capital flows into the company, to continue assessing its capability to grow and undertake its desired level of risk.

Patria US' operating performance is considered adequate. The company's initial bulk of business consists of a diverse mix of premiums retroceded from Patria Re, with a profitable track record. Synergies with Patria Re and the small size of Patria US' operation are expected to help keep operating expenses stable. As of September 2024, Patria US has reported positive bottom-line results, achieved through premium sufficiency. AM Best will continue to monitor the underwriting quality and operating expenses to further assess this building block assessment.

Peña Verde and Patria Re have established a solid niche position in Mexico and in other Latin America markets; however, Patria US' business profile is considered limited, given its strategic role within the group.

Patria US shares all the group's comprehensive ERM infrastructure and practices, as well as the expertise from its shared management team. AM Best considers the company's ERM assessment as appropriate for its risk appetite and as being strongly supported by the holding company's back office.

The stable outlooks reflect the support Patria Re US receives from its group, which translates into capital contributions when required, as well as profitable business cessions to back up growth, given the strategic importance of the entity.

Positive rating actions could occur if Patria US is able to strengthen its capital base through capital contributions and profitable results, elevating its risk-adjusted capitalization to the strongest level, and demonstrating a consistent trend. Negative rating actions could take place if the operating performance of the inherited business portfolio deteriorates to a level that is no longer profitable and significant losses translate into a weakened capital base. Negative rating actions could also take place if the support that Patria Re US receives from its group decreases in AM Best's opinion.

The methodology used in determining these ratings is Best's Credit Rating Methodology (Version Aug. 29, 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:

· Evaluating Country Risk (Version June 6, 2024)

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

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

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

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

· Rating New Company Formations (Version Sep. 5, 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. 30, 2023

· Initial Rating Date: Aug. 30, 2023

· Date Range of Financial Data Used: Dec. 31, 2023-Sept. 30, 2024

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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.