AM Best affirms ratings of Assured Guaranty subsidiary

AM Best affirms ratings of Assured Guaranty subsidiary | Insurance Business Australia

Reinsurance

AM Best affirms ratings of Assured Guaranty subsidiary

Company receives superior financial strength rating

Reinsurance

By
Grant Funtila

American credit rating agency, AM Best, affirms the A+ (superior) financial strength rating and the long-term issuer credit rating of “aa” (superior) given to Assured Guaranty Re Overseas (AGRO) Ltd.

AM Best assessed AGRO’s balance sheet strength as the strongest, as well as its adequate operating performance, neutral business profile, and appropriate enterprise risk management.

The rating agency also projects AGRO’s risk-adjusted capitalization, as measured by the agency’s capital adequacy ratio, to remain at the strongest level over the next year.

“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, the ultimate parent, as well as AGRO’s active capital management, provide support for the balance sheet strength assessment of strongest,” AM Best said.

“AM Best assesses AGRO’s operating performance as adequate based on its operating results, which continue to be driven primarily by investment income.

“The company’s loss ratio remained negative in 2022-2023 after being heightened in 2020-2021. The decrease is mainly driven by favorable reserve development in the aircraft residual value insurance business.

“AGRO’s expense ratio, while still high, has come down significantly in 2023 due to an increase in earned premium from guarantee fees.

“The high combined ratio has affected AGRO’s 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 businesses.”

AM Best said it assesses AGRO’s business profile as neutral.

“The company’s life financial reinsurance program continues to exhibit risk profiles with very low loss probability,” the ratings agency said.

“In 2023, several new lines of business were added, including a credit default swap on pooled corporate credits, non-payment insurance on subscription finance facilities, and international public finance guaranty.

“AGRO has limited competition with a minimal number of players in these lines of business. AGRO actively seeks opportunistic growth in non-financial guaranty business, not in chasing premium growth.”

AM Best said AGRO’s ERM assessment is appropriate since the company has a robust ERM framework and infrastructure embedded across the AGL group of companies, of which AGRO is a member.

The rating company also mentioned the ratings take into account the benefits and support AGRO receives from the AGL group of companies and its importance to AGL’s business strategy and profile.