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 (AGRO).
The outlook of these ratings is stable.
AM Best says the ratings reflect AGRO’s balance sheet strength, which it 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 its capital adequacy ratio, is currently projected by AM Best to be at the “strongest level” over the next year. Shareholders’ equity of AGRO decreased in 2022 due to markdowns in the investment portfolio.
The company’s strong liquidity position, conservative investment portfolio and well-positioned financial flexibility is due to its affiliation with Assured Guaranty Re, the indirect parent, and Assured Guaranty Ltd. (AGL), the ultimate parent. The liquidity position is also based on AGRO’s active capital management which provides 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. Loss ratio has decreased after being heightened between 2020 and 2021. The decrease is mainly driven by favourable reserve development in the aircraft residual value (RVI) insurance business.
The ratings company assesses AGRO’s business profile as neutral. The company’s life financial reinsurance programme exhibits risk profiles with very low loss probability.
AGRO’s aircraft RVI programme has been suspended since 2020 due to the COVID-19 pandemic. In 2022, two new lines of business were added: international public finance swaps and commercial real estate income supplement guarantee.
The firm has limited competition with a minimal number of players in these lines of business.
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.
