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TMCNet:  A.M. Best Affirms Ratings of IRB- Brasil Resseguros S.A.

[December 10, 2013]

A.M. Best Affirms Ratings of IRB- Brasil Resseguros S.A.

OLDWICK, N.J. --(Business Wire)--

A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of "a-" of IRB- Brasil Resseguros S.A. (IRB) (Brazil). The outlook for both ratings is stable.

The ratings reflect IRB's strong business profile in the Brazilian reinsurance market, solid overall financial performance and excellent risk-adjusted capitalization. Since the reinsurance market opened in Brazil, IRB holds the largest market share by a wide margin, despite intense competition. In recent years, as the Brazilian reinsurance market has transitioned to a more open market, IRB has enacted various initiatives to maintain market share and to position itself for expansion outside of Brazil and Latin America. IRB has completed its privatization in recent months, when the Brazilian government reduced its stake in IRB and ceased to be its sole controlling shareholder. This restructuring should provide IRB with enhanced agility and efficiency. Overall, IRB continues to have a unique and strong position in the growing Brazilian (re)insurance market, along with its defined strategy and experienced personnel to execute its business plans. A.M. Best recognizes that IRB continues to be in a state of transition and will closely monitor this phase of its development.

Rating factors that could cause an upgrade to IRB's ratings and/or revise the outlook to positive include maintenance of a strong risk-adjusted capital oupled with a strong operating performance.

Partially offsetting these positive rating factors are sustained and significant competitive market pressures on IRB as more reinsurance companies enter the Brazilian market each year, as well as potentially new or altered regulatory requirements, which may or may not be favorable to the company. The aforementioned challenges and other rating factors, which could lead to a downgrading of the ratings and/or a revision of the outlook to negative include a material loss of capital, whether it is driven by investment losses or underwriting losses, increased volatility with regards to operating performance relative to other market participants or a material decline in the company's risk-adjusted capital if, for example, premium growth is pursued in a manner that strains its claims paying ability.

In Latin America, Brazil offers the largest (re)insurance market. It has the largest population in South America and is among the 10 largest economies in the world by gross domestic product. Currently, Brazil has a low insurance penetration and a favorable economic environment, which represents significant growth potential, making it an attractive place for (re)insurance companies. In Brazil, reinsurance companies fall into three categories depending on a company's participation and financial commitment: "local," "admitted" and "occasional." IRB is a "local" reinsurance company and up until 2007, when the Brazilian reinsurance market was opened to international reinsurance companies, it was privy to a long-standing monopoly. IRB has predominately operated as a property/casualty reinsurer with a small amount of life business.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit

Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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