Fitch Downgrades Seguros e Inversiones S.A. y Filial to 'BB-'; Outlook Stable

SAN SALVADOR--()--Fitch Ratings has downgraded the Insurer Financial Strength ratings of Seguros e Inversiones S.A. y Filial, (SISA) and Sisa Vida S.A., Seguros de Personas (Sisa Vida) (together, SISA) to 'BB-' from 'BB'.

The rating action follows the closing of the acquisition of SISA and Sisa Vida by Grupo Terra (Terra) from Citigroup, after approval from the Superintendent of the Financial System, in El Salvador.

KEY RATING FACTORS

SISA's ratings are driven by its stand-alone profile as well as the partial support from its new shareholder. Fitch's opinion of Terra's credit profile is based on geographical and business line diversification and robust cash flow generation. In addition, Fitch takes into consideration the financial capacity of Terra's main subsidiary, Petroholdings, privately rated by Fitch.

The ratings consider SISA's strong market position and leadership in the Salvadoran insurance sector, adequate technical profitability, appropriate levels of capitalization and ample liquidity ratios.

SISA comprises the largest insurance group in El Salvador. At December 2015, on a consolidated basis SISA remained as the largest Salvadoran insurance group, with a 21% market share. In 2016, SISA will no longer receive regional captive business from Citigroup subsidiaries; however, in Fitch's view it will not affect the leadership position of the insurance group in El Salvador.

The potential for support from Terra considers the strategic importance of the two insurers in El Salvador, based on the integration with the sibling bank, Banco Cuscatlan. While there are potential synergies the insurance companies may share with the current operations of Terra, Fitch notes that this will take some time to develop. Fitch assigns a one-notch benefit to the IFS ratings for ownership.

Terra is a diversified investment conglomerate based in Honduras that has investments in five strategic areas: power generation, supply and distribution of petroleum products, airport infrastructure, real estate development, and banking and insurance. Terra participates in several key industry sectors of Central American economies as well as in some South American countries. While Terra has a long track record of investing this will be its first venture into the financial and insurance sector.

RATING SENSITIVITIES

Key rating triggers that may lead a downgrade include a sustained technical performance slowdown, higher leverage ratios and weakening market position, along with deterioration in Fitch's risk perception of Terra.

SISA is already rated one notch above the El Salvador sovereign rating of 'B+'; thus there is no upside potential at the moment.

Fitch has downgraded the following ratings:

Seguros e Inversiones S.A. y Filial :

--National scale IFS rating to 'AA(slv)' from 'AAA(slv)'; removed from Rating Watch Negative

--International scale IFS rating to 'BB-' from 'BB'; removed from Rating Watch Negative

--Assigned a Stable Outlook.

Sisa Vida S.A., Seguros de Personas :

--National scale IFS rating to 'AA(slv)' from 'AAA(slv)'; removed from Rating Watch Negative

--International scale IFS rating to 'BB-' from 'BB'; removed from Rating Watch Negative

--Assigned a Stable Outlook.

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

In applying Fitch's insurance criteria with respect to the impact of ownership on SISA's ratings, Fitch considered how the ratings could theoretically be impacted under Fitch's corporates and bank support criteria. With respect to ownership, Fitch's insurance criteria are principles-based, and the noted bank and corporates criteria were used to help inform Fitch's judgment in applying those principles.

Applicable Criteria

Global Bank Rating Criteria (pub. 20 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863501

Insurance Rating Methodology (pub. 17 May 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=881564

Parent and Subsidiary Rating Linkage (pub. 10 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869363

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1008655

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1008655

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Eugenia Martinez, +52 82 8399 9155
Associate Director
Prol. Alfonso Reyes No. 2612, Edificio Connexity
Piso 8, Col. Del Paseo Residencial,
Monterrey, Nuevo Leon, 64920, Mexico
or
Secondary Analyst
Milena Carrizosa, +503 2516-6621
Director
or
Committee Chairperson
Julie Burke, CPA, CFA, +1 312-368-3158
Managing Director
or
Media Relations, New York
Hannah James, + 1 646-582-4947
hannah.james@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Eugenia Martinez, +52 82 8399 9155
Associate Director
Prol. Alfonso Reyes No. 2612, Edificio Connexity
Piso 8, Col. Del Paseo Residencial,
Monterrey, Nuevo Leon, 64920, Mexico
or
Secondary Analyst
Milena Carrizosa, +503 2516-6621
Director
or
Committee Chairperson
Julie Burke, CPA, CFA, +1 312-368-3158
Managing Director
or
Media Relations, New York
Hannah James, + 1 646-582-4947
hannah.james@fitchratings.com