SAO PAULO--(BUSINESS WIRE)--Fitch Ratings has affirmed the 'BBB+' Insurer Financial Strength (IFS) rating for Maxseguros EPM Re LTD (Maxseguros). The Rating Outlook is Stable.
KEY RATING DRIVERS
Maxseguros' rating is in line with that of its parent's rating -- Empresas Publicas de Medellin S.A. E.S.P. (EPM) -- given the methodological approach of captive subsidiaries, where Fitch Ratings categorizes Maxseguros as a core captive reinsurance company. EPM has an international local currency rating of 'BBB+' with a Stable Outlook.
Maxseguros is a core captive reinsurance company to EPM due to its strategic importance in managing the risks and structuring the insurance coverage of EPM Group. The support of the shareholder is evidenced by the formal support in managing the investment portfolio of the captive; the provision of resources for the optimal operation and the transference of strong corporate governance practices.
Maxseguros is a captive reinsurer domiciled in Bermuda that only engages in reinsuring the risks of EPM and the subsidiaries in which it has controlling interest. Maxseguros controls EPM's insurance programs and plays an important role in the strategic plan of EPM to seek optimum retentions and to have a better control of its risks and exposures.
Maxseguros has not only provided financial efficiencies in the insurance strategy of EPM group, it has also provided technical optimization in the insurance program. The reinsurance company has improved deductibles and increased coverage in EPM's subsidiaries.
Maxseguros's capital has strengthened in the last five years. The total capital was USD 40.6 million as Sept. 30, 2015 vs USD 3.06 million as Dec. 31, 2010. This trend is favored by the positive internal capital generation and the profit reinvestment policy. Additionally, during 2015 the equity increased due to the capitalization of USD 10 million, coming from the EPM's self-insurance fund.
Key Negative changes to EPM's ratings or to its ability and willingness to provide support could result in a downgrade for Maxseguros. However, Fitch views the latter as unlikely.
Fitch may consider an upgrade of Maxseguros' rating if EPM's rating is upgraded.
Additional information is available on www.fitchratings.com
Insurance Rating Methodology (pub. 16 Sep 2015)
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