AMSTERDAM--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Santa Lucía S.A. Compañía de Seguros y Reaseguros (Santalucía) (Spain). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Santalucía’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
Santalucía’s risk-adjusted capitalisation remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by good internal capital generation. The company’s balance sheet strength benefits from the protection against losses from most natural perils provided by the Spanish government’s national scheme (Consorcio de Compensacion de Seguros). An offsetting factor is the exposure to higher investment risk stemming from the acquisition of Aviva’s Spanish life insurance business. AM Best expects the prospective capital position to benefit from stable retained earnings and a prudent dividend policy at approximately 30% pay-out ratio set in 2018.
Santalucía’s operating performance benefits from a track record of solid technical earnings primarily stemming from the funeral expenses (decesos) line of business, in which it has a leading market position. The acquisition of Aviva’s life business, together with the group’s strategy of investing in joint ventures that complement the decesos line of business, has overall shown positive contributions toward profitability. In 2018, Santalucía’s profit before tax stood at EUR 162.4 million, equivalent to a return on equity of 7.0%.
Santalucía has an established profile as a provider of personal insurance product lines in Spain and benefits from a long-standing brand and good reputation in the sector. Santalucía is now the eighth-largest insurance group in Spain by gross written premiums, with its profile enhanced by an improved business mix and broader reach of its network mainly within Spain.
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