OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” of Scotia Reinsurance Limited (Scotia Re) (Barbados). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Scotia Re’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management. The ratings also reflect rating enhancement from the company’s ultimate parent, The Bank of Nova Scotia (Scotiabank).
Scotia Re is primarily a life reinsurance subsidiary that assumes non-Canadian business, largely from Mexico, South and Central America and the Caribbean, sourced through Scotiabank branches. The initial book of business was assumed in 2017 from its sister company, Scotia Insurance (Barbados) Limited, which has a long history of favorable underwriting results. The business assumed continued favorable results under Scotia Re after its second full year in operation, resulting in highly favorable return metrics. The company’s balance sheet strength is bolstered further by the strongest level of risk-adjusted capitalization, reflecting in part a conservative short duration and highly liquid investment portfolio.
These strengths are offset partially by the company’s dependence for growth on consumer loan originations in economies outside of Canada, many of which are deemed to have higher country risk profiles.
With a slowdown of the global economy from the COVID-19 pandemic, it is likely Scotia Re will see a decline in assumed premiums in the near term. Furthermore, a high dividend payout ratio results in a lack of absolute capital growth. However, AM Best notes that in a stress scenario, Scotia Re could recapitalize by adjusting its shareholder dividend payout.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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