AM Best Upgrades Issuer Credit Rating of Reaseguradora Delta, S.A.; Assigns Credit Ratings to Reaseguradora Delta, C.A.
AM Best has upgraded the Long-Term Issuer Credit Rating to "bbb+" (Good) from "bbb" (Good) and affirmed the Financial Strength Rating of B++ (Good) of Reaseguradora Delta, S.A. (Delta Panama) (Panama City, Panama). The outlook of these Credit Ratings (ratings) is stable. Concurrently, AM Best has assigned an FSR of B++ (Good) and a Long-Term ICR of "bbb+" (Good) to Reaseguradora Delta, C.A. (Delta Venezuela) (Caracas, Venezuela). The outlook assigned to these ratings is stable.
The ratings of Delta Panama reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The upgrade of Delta Panama's Long-Term ICR is driven by the strengthening of the company's capital base, after the company received a material capital infusion that translated into improved risk-adjusted capitalization, as measured by Best Capital Adequacy Ratio (BCAR), as well as favorable levels of underwriting leverage that reflect a strengthened and well protected balance sheet.
The stable outlooks reflect AM Best's expectations that Delta Panama will maintain the strongest levels of risk-adjusted capitalization, driven by prudent risk selection while successfully implementing its geographic expansion.
Delta Panama's very strong balance sheet strength recognizes the company's adequately matched obligations and risk appetite, as well as its shareholders' commitment to strengthening the company's capital base, reflected in its strongest levels of risk-adjusted capitalization and favorable net underwriting leverage metrics.
The company's operating performance is characterized as being profitable; positive bottom-line results have been achieved through technical results in all lines of business during 2022. While investment income contributes to Delta Panama's earnings, it is limited by the conservatism of the portfolio. AM Best expects Delta Panama to maintain premium sufficiency levels while implementing its growth strategy.
Delta Panama, founded in Panama in 2010, offers treaty and facultative reinsurance for several lines of business, including fire, surety, construction and engineering, auto, marine aviation and transport, personal liabilities, robbery and personal accidents. Most of its portfolio is composed of treaty contracts, at approximately 60%, while facultative reinsurance accounts for 40%. Delta Panama is diversified geographically, as the company underwrites premiums in Ecuador, Panama, Dominican Republic and Paraguay through distribution channels that include brokers and alliances with other reinsurers, as well as a managing general agent established in Miami by Delta Panama's shareholders. AM Best assesses the company's business profile as neutral.
ERM is considered appropriate, as it is well-integrated into its operations; risk appetite and tolerance are well-defined, and the company takes advantage of its pricing model and management team, which has over 20 years of experience in Latin America's market. The company has a sound excess of loss retrocession program in place with highly rated reinsures with an excellent level of security.
Delta Venezuela is a reinsurance company, founded in Caracas, Venezuela, in 1963. The company has shared with Delta Panama top management and major shareholders since 2010; it offers treaty and facultative reinsurance for several lines of business, including fire, surety, construction and engineering, auto, marine aviation and transport, personal liabilities, robbery and personal accidents. The company underwrites premiums in Venezuela and Ecuador through shared distribution channels.
Delta Venezuela's risk-adjusted capitalization stands at the strongest level, as measured by BCAR, and the company is well-protected against the economic volatility present in Venezuela through its conservative investment strategy. The company's operating performance is characterized as being profitable; positive bottom-line results have been achieved through technical results in all lines of business during 2022. Delta Venezuela receives substantial reinsurance support in terms of underwriting, reinsurance protection and ERM from Delta Panama, through a comprehensive 90-10% quota share contract.
Positive rating actions could take place if Delta Panama is able to demonstrate a stable, upward trend of profitable operating results that improve metrics to a point where they compare favorably with a strong assessment level. Negative rating actions could occur if the company's capital base erodes due to cash withdrawals or a deterioration in operating results that would debilitate risk-adjusted capitalization to a point no longer supportive of the current assessment.
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