AM Best has affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of “a-” (Excellent) of Nova Casiopea Re (NCRe). The outlook for these credit ratings is stable. NCRe is a Luxembourg-based single-parent captive of Telefónica, a Spanish multinational broadband and telecommunications provider. The ratings reflect NCRe’s balance sheet strength, which AM Best assesses as very strong, alongside its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). NCRe’s balance sheet strength is supported by its risk-adjusted capitalisation at the "strongest" level, as measured by Best’s Capital Adequacy Ratio (BCAR). This is further bolstered by capital buffers in the form of equalisation reserves and a conservative, liquid investment portfolio. However, the rating agency notes that NCRe’s elevated exposure to natural catastrophe risk remains an offsetting factor, with the potential to introduce volatility to capitalisation levels. In 2024, the captive generated a pre-tax profit of €21.7 million, an increase from €21.1 million in 2023. This performance was supported by robust underwriting results and solid non-technical profits. AM Best calculates NCRe’s combined ratio at 63.7% for the 2024 year-end. AM Best highlights that NCRe is well integrated into Telefónica’s risk management framework, serving as a "cost-effective risk management tool" for the group. While the captive benefits from Telefónica’s geographic diversification, AM Best observes that its business profile remains constrained to the parent company’s operations. The ongoing spin-offs of Telefónica’s businesses in Latin America (excluding Brazil) may impact the captive’s profile and shift its natural catastrophe exposure in the future.
