Fitch Publishes the 2013 Outlook for the Central American Insurance Region

SAN SALVADOR, El Salvador--()--Fitch Ratings has published the 2013 Outlook for the Central American Insurance Region's special report.

Fitch's outlook for the insurance companies among the different markets in the Central American region will remain stable in 2013. It should be noted that a large number of the insurance companies' ratings assigned in the region benefit from their controlling shareholders' support, which also reflects a good credit quality in most cases.

Fitch considers that premiums in the Central American region should grow by a modest 7% at the end of 2012, and 6.4% at the end of 2013, led by the Costa Rican insurance market, the second-largest in the region. Fitch estimates that Costa Rica will maintain a strong dynamism, as it is still in an expansion phase since opening to private competition in 2008. Fitch expects the insurance industry penetration to be around 2%, lower than that of the main markets in South America, at above 3%.

Fitch believes that the region will maintain adequate operating performance in 2013, led by the markets of Honduras and El Salvador, which in recent years had registered the lowest loss ratios of the region, and a higher operational efficiency in the case of El Salvador. Fitch expects that Honduras and El Salvador will continue to influence the good performance of the region in 2013. This is mainly due to their conservative reinsurance protections, which is unlike other countries in the region where there is greater prominence of retained business lines of high claims frequency.

The agency estimates that the strategic approach of the different markets of the Central American region will be increasingly focused on the generation and marketing of mass insurance products, both through traditional and nontraditional channels. According to Fitch, this should promote higher growth rates and risk diversification in premiums portfolios of the insurance companies in the long term, enabling them to experience a favorable evolution in their performance and profitability.

Fitch believes that the region reflects a good capital position in average, which also results in a relatively low operating leverage ratio (average of 1.0x). Fitch expects to see a strengthening in the region's capital level in 2013, in light of the regulatory adjustments recently implemented in Nicaragua and Guatemala, historically the region's less capitalized insurance markets.

Fitch believes that a shift to a negative outlook in the region's insurance markets could be the result of a number of factors. Among them are a significant deterioration in their performance, due to an intensification in price competition that prevails in all countries; an abrupt escalation in crime rates; or statistical deviations in the frequency and/or severity of catastrophic events in the countries.

Fitch also notes that the rating outlook of the region's insurance companies, whose ratings benefit from explicit support from its major shareholders, could experience unfavorable movement due to changes in the willingness and/or availability of its shareholders to continue providing support.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Jan. 11, 2013).

Applicable Criteria and Related Research: 2013 Outlook: Central American Region Insurance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=699547

Insurance Rating Methodology - Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=698731

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Contacts

Fitch Ratings
Eduardo Recinos, +503 2516 6606
Senior Director
Fitch Centroamerica, S.A., Edificio Plaza Cristal, 79 Av. Sur y Calle Cuscatlan, San Salvador, El Salvador.
or
Jazmin Roque, +503 2516 6607
Associate Director
or
Maria Jose Arango, +503 2516 6620
Associate Director
or
Elizabeth Fogerty, New York, +1 212-908-0526
Email: elizabeth.fogerty@fitchratings.com

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Contacts

Fitch Ratings
Eduardo Recinos, +503 2516 6606
Senior Director
Fitch Centroamerica, S.A., Edificio Plaza Cristal, 79 Av. Sur y Calle Cuscatlan, San Salvador, El Salvador.
or
Jazmin Roque, +503 2516 6607
Associate Director
or
Maria Jose Arango, +503 2516 6620
Associate Director
or
Elizabeth Fogerty, New York, +1 212-908-0526
Email: elizabeth.fogerty@fitchratings.com