MEXICO CITY--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” of Seguros Suramericana S.A. (Sura) (Panama). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Sura’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
Sura’s balance sheet strength is underpinned by its risk-adjusted capitalization being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by a well-structured reinsurance program, synergies provided by Grupo de Inversiones Suramericana S.A. (Grupo Sura), and improved underwriting performance partially driven by its previous integration with Seguros Banistmo, S.A. (Seguros Banistmo) in 2015. Offsetting these positive rating factors is Panama’s highly competitive landscape, which could pressure Sura’s operating performance.
As of year-end 2017, the company remains the fourth-largest insurer in Panama, with a market share of 9.7%. Sixty-four percent of its business portfolio is composed of property/casualty (P/C) products, with life products making up the remaining 36%. Sura’s main P/C business segment is auto, which represents 34% of its gross written premiums. The acquisition of Seguros Banistmo was led in 2015 by Grupo Sura, a leading Colombian financial services company in the Latin American insurance, asset management and banking industries. No integration risks have emerged from the transaction.
Sura´s capitalization, driven by its value-based management model, is reinforced consistently through profitability and a prudent dividend policy, enabling the company to maintain current capital adequacy levels while meeting the group’s post-merger return on investment goals. Additionally, the company’s balance sheet strength is supported by a comprehensive reinsurance program set with reinsurers that have excellent security and the implementation of an internal economic capital model.
Sound underwriting practices, coupled with merger synergies that have minimized administrative costs, have driven Sura´s strong operating performance as reflected in profitability metrics characterized by a positive trend; at year-end 2017, the company managed to generate a combined ratio of 79%. In addition, the business profile benefited from the merger in terms of added diversification and synergies, such as the bancassurance distribution channel.
Positive changes in the ratings or outlooks could occur if the company continues to maintain its post-merger performance and profitability, leading to higher levels of risk-adjusted capitalization. Negative rating actions could result if the expected operating performance deviates considerably and weakens due to Panama’s highly competitive environment, affecting the company’s risk-adjusted 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)
- Catastrophe Analysis in A.M. Best Ratings (Version Oct. 13, 2017)
- Evaluating Country Risk (Version Oct. 13, 2017)
- Understanding Universal BCAR (Version May 14, 2018)
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. 14, 2017
- Date of Financial Data Used: June 30, 2018
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