A.M. Best Affirms Ratings of ASSA Compañía de Seguros S.A., Lion Reinsurance Company Limited and Reaseguradora America SPC Ltd.

MEXICO CITY--()--A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit rating (ICR) of “a” of ASSA Compañía de Seguros, S.A. (ASSA) (Panama City, Panama).

A.M. Best also has affirmed the FSR of A- (Excellent) and the ICRs of “a-” of Lion Reinsurance Company Limited (Lion Re) (Bermuda) and Reaseguradora America SPC Ltd (RAM Re) (Cayman Islands). All companies are ultimately owned by Grupo ASSA, S.A. (Grupo ASSA), a financial services holding company publicly traded on the Panama Stock Exchange. The outlook for all ratings is stable.

The ratings reflect ASSA’s consistent excellent operating results, strong capitalization and a defined business profile. ASSA maintains a well-diversified book of business that includes both property/casualty and life/health products.

During 2013, net income remained positive although diminished in comparison to results reported in 2012 due to increased claims and a marginal rise in the expense ratio that pressured technical results; nevertheless, the company closed 2013 with a combined ratio of 94.3% versus 92.3% in 2012. As of September 2014, A.M. Best has seen an improvement in technical results and expects the company to sustain this performance as underwriting policies are constantly monitored and adjusted to maintain a balance between policyholders’ benefits and ASSA’s profitability. The capitalization for the company is strong and shows a positive trend as measured by Best’s Capital Adequacy Ratio (BCAR). This reflects the company’s positive capital generation capabilities, as well as its good prospects for growth given its dominance within Panama’s insurance market. Additionally, ASSA maintains a very good reinsurance program that limits its exposures and boosts its financial flexibility.

In conjunction with the captive affiliates, Lion Re and RAM Re; ASSA and the Grupo Assa are able to maintain financial flexibility for their operations and strengthen relations with key clients.

The performance of Lion Re has continued to improve during the past two years showing adequate combined ratios, increased positive bottom line results, and good prospects for growth, which are linked to the underwriting performance of its affiliates. A.M. Best expects Lion Re to maintain its good capital position and to improve its operating performance as the business it takes on becomes of better quality.

RAM Re’s business has grown substantially as of September 2014 given the incorporation of a new segregated portfolio to its structure. This change in premiums comes with a high leverage to its capital; however, given the short tail nature of the business and its non-catastrophic characteristics, as well as the support given by its parent, capitalization levels are in line with those of the rating. Looking forward, A.M. Best expects to see increased capital allocations within RAM Re, in line with substantial increases on its business book in order to maintain a reasonable leverage and maintain capitalization levels that are supportive of the current ratings.

ASSA, Lion Re and RAM Re show a solid business strategy, adequate operating performance and strong capitalization levels; however, the ratings also take into account limiting factors such as ASSA’s risk concentration in a geographically limited insurance market, along with operating in a country that A.M. Best considers to have an elevated level of country risk, implementation risk for RAM Re’s strategy, maintenance of current trend in operating performance of Lion Re and competition within Panama’s market.

Positive rating actions could occur if ASSA maintains its consistently strong underwriting performance and long-term profitability in conjunction with an upgrade in Panama’s country risk tier. Negative rating triggers could include a significant decline in the company’s risk-based capitalization, sustained adverse operating performance or a downgrade in Panama’s country risk tier.

Drivers that could lead to an upgrade of the ratings and/or a positive outlook for Lion Re and RAM Re are stable underwriting performances, as well as reduced overall net exposure over the next few years and successful implementation of their business plans. Factors that could lead to a downgrading of the ratings and/or a negative outlook are a material loss of capital from either claims or investments, a reduced level of capital that does not support their ratings or an increase in net retention.

ASSA, Lion Re and RAM Re’s ratings are tied to A.M. Best’s internal assessment of Grupo ASSA; therefore, an unfavorable operating performance or material loss of capital could result in changes to these captives’ ratings.

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.

Key insurance criteria reports utilized:

  • Evaluating Country Risk
  • Rating Members of Insurance Groups
  • Rating Protected Cell Companies
  • Risk Management and the Rating Process for Insurance Companies
  • Understanding Universal BCAR
  • Catastrophe Analysis in A.M. Best Ratings

Click here for a general description of the policies and procedures used to determine credit ratings. Also in accordance with Mexican regulations, the following is a link to required disclosures – A.M. Best America Latina Supplementary Disclosure.

  • Previous Rating Date: Jan. 16, 2014
  • Date of Financial Data Used: Sept. 30, 2014

This press release relates to rating(s) that have been published on A.M. Best's website. For additional 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 visit A.M. Best’s Ratings & Criteria Center.

A.M. Best’s credit ratings are independent and objective opinions, not statements of fact. A.M. Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. A.M. Best’s credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions. View our entire notice for complete details.

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Contacts

A.M. Best Company
Elí Sánchez, +(52) 55-1102-2720, ext. 108
Financial Analyst
eli.sanchez@ambest.com
or
Alfonso Novelo, +(52) 55-1102-2720, ext. 107
Director, Analytics
alfonso.novelo@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best Company
Elí Sánchez, +(52) 55-1102-2720, ext. 108
Financial Analyst
eli.sanchez@ambest.com
or
Alfonso Novelo, +(52) 55-1102-2720, ext. 107
Director, Analytics
alfonso.novelo@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com