MEXICO CITY--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of “a-” of Aseguradora Ancón, S.A. (Ancón) (Panama). The outlook for both ratings is stable.
The ratings reflect Ancón’s improving underwriting practices, its good position within Panama’s market and its well-structured reinsurance program that is placed with strong, quality reinsurers. Offsetting factors include the company’s operating performance during the past year and pressures on its risk-adjusted capital.
Ancón is the sixth largest insurer in Panama with a market share of 5.2% as of December 2014; the company’s business portfolio is 94% property/casualty and 4% life. Surety business generates the bulk of Ancón’s non-life written premiums at 37%, and is followed by auto insurance at 28%.
During 2014, Ancón’s net income was negatively affected by the results in its automobile and fire lines of business with each segment being impacted by increased competition and high claims. The company began taking adequate measures in the second quarter of 2014 to improve its performance in both segments, improving its overall combined ratio to 90.9% as of June 2015 compared with 104.4% at year-end 2014. A.M. Best expects this tendency to continue in the second half of 2015. Risk-adjusted capitalization was pressured by the negative result in 2014, but remains supportive of the ratings. A.M. Best expects that the adjustments in underwriting practices will improve bottom line results and profitability, which will contribute to strengthening the company’s capitalization in the midterm.
Market competition in Panama’s auto segment has been harsh during the past year. This has resulted in general complications for the market, including progressive deterioration in the market-wide quality of underwriting, which left leading companies, such as Ancón, susceptible to price battles in 2014. However, A.M. Best has seen Ancón improve its combined ratio to 94.5% in this line as of June 2015, compared with its 2014 combined ratio of 127.9%. Fire has been another competitive segment in Panama with great exposure to Colon’s free duty zone where claims have been constant and severe. Management has also been able to limit its exposure and gain more favorable terms.
Risk-adjusted capitalization for Ancón remains supportive of the rating and is adequately protected by its well-structured reinsurance program with high quality reinsurers; however, it is still exposed to execution risk in the operating performance, which could ultimately damage the company’s capital position, as it did in 2014.
Multinational Insurance Company, a subsidiary of Ancón, is a property/casualty insurer that owns 47.79% of the shares of Multinational Life Insurance Company. Both companies are domiciled in Puerto Rico.
Negative rating actions could occur if capitalization continues to come under pressure and reaches levels that are not supportive of the current ratings or if operating performance continues to be weak. Positive rating actions could occur if Ancón is able to strengthen its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), at the same time that it reverses its negative trend in operating performance.
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 Non-Insurance Ultimate Parents
- Evaluating Country Risk
- Ratings Members of Insurance Groups
- Rating Surety Companies
- Risk Management and the Rating Process for Insurance Companies
- Understanding Universal BCAR
View 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: July 10, 2014
- Date of Financial Data Used: June 30, 2015
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.
A.M. Best receives compensation for interactive rating services provided to organizations that it rates. A.M. Best may also receive compensation from rated entities for non-rating related services or products offered by A.M. Best. A.M. Best does not offer consulting or advisory services. For more information regarding A.M. Best’s rating process, including handling of confidential (non-public) information, independence, and avoidance of conflicts of interest, please read the A.M. Best Code of Conduct.
A.M. Best - Europe Rating Services Limited (AMBERS), a subsidiary of A.M. Best Company, is an External Credit Assessment Institutions (ECAI) in the European Union (EU). Therefore, credit ratings issued by AMBERS may be used for regulatory purposes in the EU as per Directive 2006/48/EC.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.