MEXICO CITY--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Aseguradora Ancón, S.A. (Ancón) (Panama). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Ancón’s improved underwriting metrics and bottom-line results, supported by a well-structured reinsurance program that covers its different business lines, which has allowed the company to maintain adequate risk-adjusted capitalization for its current rating level. Offsetting these positive rating factors is the slow dynamism of Panama’s insurance market in 2016 and the strong competition Ancón faces in its main segments.
Ancón is the seventh-largest insurer in Panama with a market share of 4.2% as of June 2017. Property/casualty products compose 68% of its business portfolio, with the remaining 32% made up of life products (including accident and health). The company’s main segments are auto and health, representing 37% and 21%, respectively, of its gross written premiums. The company holds two subsidiaries in Puerto Rico: Multinational Insurance Company (Multinational), a property/casualty insurer, and Multinational Life Insurance Company (Multinational Life), a life insurance company.
In 2016, the company’s adjustments to underwriting resulted in an improved combined ratio, derived from lower retention in key segments, strong commissions from ceded premiums and the continuation of reserve releases that started in 2014.
Risk-adjusted capitalization for the company remains adequate for its current rating level. The prudent business strategy in terms of retention and growth has allowed Ancón to maintain stable levels of required capital while producing positive results and growth of its reported surplus. Ancón’s risk adjusted capital is further supported by a comprehensive reinsurance program set with highly rated reinsurers.
The insurance market in Panama so far in 2017 is slowly recovering from a year of nil growth in 2016; as of June 2017, it has grown 2.8% on a year-to-year basis in real terms. As a result, growth opportunities may be arising, but are still limited given the consolidation of larger insurance operations in the country and the economic cycle; however, A.M. Best expects Ancón to maintain a profitable business based on its current strategy, as shown by a return on gross written premium of 3.3% at the end of May 2017, which is in line with that of year-end 2016.
Positive movement in Ancón’s ratings or outlooks could take place if the company continues to implement its strategy in a profitable manner, while continuing to be supported by a strong reinsurance program and stable levels of risk adjusted capitalization. Negative rating actions could occur if the company’s operating results present a negative trend of sustained losses that affect its capitalization or business profile.
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:
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- Evaluating Country Risk (Version Oct. 13, 2017)
- Rating Surety Companies (Version Oct. 13, 2017)
- Understanding Universal BCAR (Version Oct. 13, 2017)
View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, please refer to Understanding Best’s Credit Ratings.
- Previous Rating Date: Sept. 15, 2016.
- Date of Financial Data Used: June 30, 2017.
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