A.M. Best Assigns Ratings to J. Malucelli Resseguradora S.A.

A.M. Best has assigned a financial strength rating of A- (Excellent) and an issuer credit rating of “a-” to J. Malucelli Resseguradora S.A. (JM Re) (Brazil). The outlook assigned to both ratings is stable.

The ratings of JM Re reflect its strong risk-adjusted capitalization, consistently profitable results and solid business profile as a leading surety reinsurer in Brazil. JM Re is classified as a local reinsurer in Brazil and has been part of an organization writing surety business for more than twenty years. JM Re also derives operational benefits from its 49.5% minority shareholder, The Travelers' Companies, Inc. These benefits include collaboration on enterprise risk management, employee development, retrocession placement, claims handling and other operational functions. JM Re maintains strong leverage and liquidity metrics and a comprehensive retrocession program that provides additional capacity and reduces the company's overall exposures.

Partially offsetting these positive factors is JM Re's concentration risk as essentially a mono-line surety writer in a single country. JM Re's future plans to mitigate this risk include expansion into related lines of business and geographic diversification into other parts of Latin America. Additionally, as the Brazilian economy continues to grow and insurance penetration increases, the reinsurance market is becoming increasingly competitive with both indigenous and global reinsurers vying for market share.

Rating factors that could lead to a positive rating movement include successful long term execution of JM Re's growth and diversification strategy, consistent operating performance along with maintaining robust risk adjusted capitalization. Negative rating triggers include deterioration in either operating results or risk-adjusted capitalization, or a downgrade in Brazil's country risk tier.

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 www.ambest.com/ratings/methodology.

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