The credit ratings of Bermudian-based Assured Guaranty Re Overseas Ltd have been affirmed by AM Best, the credit ratings agency.

AM Best affirmed the ‘A+“ rating for financial strength and the ”aa“ long-term issuer credit rating. The outlook of these credit ratings is stable.

The agency said the ratings reflect Agro’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

It added that Agro’s risk-adjusted capital, as measured by Best’s capital adequacy ratio, is currently and projected by AM Best to be at the strongest level over the next year.

AM Best said shareholders’ equity of Agro decreased in 2022 due to mark downs in the investment portfolio.

The company’s strong liquidity position, conservative investment portfolio and well-positioned financial flexibility due to its affiliation with Assured Guaranty Re, the indirect parent, and Assured Guaranty, the ultimate parent, as well as Agro’s active capital management, provide support for the balance sheet assessment of strongest, the agency said.

It added: “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 significantly after being heightened in 2020-2021. The decrease is mainly driven by favourable reserve development in the aircraft residual value insurance business.

“Since 2020, Agro’s expense ratios have been hampered by the increase in expenses and a lower earned premium base.

“The high combined ratio has affected Agro’s current overall operating performance.

“Agro has low net returns on equity due to its underutilisation of capital and the opportunistic deployment of capital to new non-financial guaranty business.”

AM Best said it assesses Agro’s business profile as neutral. The company’s life financial reinsurance programme continues to exhibit 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, AM Best said, two new lines of business were added: international public finance swaps and commercial real estate income supplement guaranty. Agro has limited competition with a minimal number of players in these lines of business.

AM Best said: “Agro actively seeks opportunistic growth in non-financial guaranty business, not in chasing premium growth.”

The agency said 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 said it considers Agro’s risk assessment capabilities to be aligned appropriately with its risk profile.

It added that the ratings also take into consideration the benefits and support Agro receives from the AGL group of companies — a broader, successful franchise — and its importance to AGL’s overall business strategy and profile.