MEXICO CITY--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” of Pacífico Compañía de Seguros y Reaseguros S.A. (PCS) (Lima, Perú). The outlook of these Credit Ratings (ratings) remains stable. A.M. Best also has withdrawn the FSR of A- (Excellent) and the Long-Term ICR of “a-” with a stable outlook of El Pacífico-Peruano Suiza Compañía de Seguros y Reaseguros S.A. (PPS) (Lima, Perú).
PPS’ ratings have been withdrawn as a result of its absorption by a subsidiary, El PACÍFICO VIDA Compañía de Seguros (PVS) in August 2017, resulting in a consolidation of operations and a name change to PCS from PVS. The ratings of PCS reflect the benefits of the consolidation in terms of improved risk-adjusted capitalization, better performance metrics and the expectancy of further synergies in diverse processes. Additionally, the ratings recognize PCS’ strong market share in Peru’s insurance market, as well as its comprehensive and well-diversified reinsurance program. Limiting the ratings is the competitive landscape in Peru, a market with a limited number of participants when compared with more developed insurance markets.
PCS is Peru’s second-largest insurer with a market share of 25.4%. As of August 2017, the company’s business portfolio was composed of 51.1% life and 48.9% non-life. Its ultimate parent is Peru’s largest financial holding company, Credicorp Ltd. [NYSE: BAP], which had USD 47 billion in assets as of December 2016.
The formation of PCS seeks to create operating synergies and improve capital management, a result that was reflected in its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). When compared individually with PVS and PPS, PCS recorded a larger reported surplus of approximately PEN1.9 billion, and also benefits from risk mitigation achieved through diversification and a robust and comprehensive reinsurance program with highly rated reinsurers. PCS’ operating performance also generated adequate metrics, as of August 2017; however, further experience of the composite company is necessary to see the full benefits of the integration.
Since the previous rating review, Pacífico (now part of PCS) has taken measures to reduce administrative costs with the consolidation of operations. A.M. Best expects the company to further achieve efficiencies in its operating and technical areas; however, to further assess its definitive impact on the ratings, A.M. Best expects to see a sustained improvement in the medium term.
Positive rating actions could take place if the company is able to improve its operating results in the medium term, mainly guided by its efficiency efforts, while materially improving its risk-adjusted capitalization. Negative rating actions could take place if the company’s underwriting results weaken due to relaxed underwriting or a more aggressive risk appetite that could erode capital to levels that no longer support the net required capital for the risks the company faces.
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 (Version Oct. 13, 2017)
- Understanding Universal BCAR (Version Oct. 13, 2017)
- Catastrophe Analysis in A.M. Best Ratings (Version Oct. 13, 2017)
- Available Capital & Holding Company Analysis (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: Aug. 30, 2017.
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