AM Best Affirms Credit Ratings of Instituto Nacional de Seguros

MEXICO CITY--()--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Instituto Nacional de Seguros (INS) (San Jose, Costa Rica). The outlook of these Credit Ratings (ratings) remains positive.

The ratings reflect INS’ balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

AM Best is maintaining the positive outlook to reflect the still-favorable operating performance metrics posted in recent years, as well as the company’s continuous and successful adaptation to the environment in which it operates.

INS’ assessed risk-adjusted capitalization level of strongest, as measured by Best’s Capital Adequacy Ratio (BCAR), is supported by a comprehensive and adequate reinsurance program, solid operating performance and its position as the leading insurer in Costa Rica. The assessment of INS’ business profile considers the characteristics of Costa Rica’s market, derived from the country’s Insurance Law of 2008, and includes INS’ robust market share and the guarantee provided by the Costa Rican government to support INS’ domestic obligations.

INS is Costa Rica’s largest insurer with a market share of 72%, as of December 2019. The company has exclusivity on underwriting compulsory workers’ compensation and mandatory auto insurance. INS’ compulsory premium segment represents 36% of its business portfolio and 26% of the industry’s total premiums written.

The positive outlooks on INS’ ratings reflect the operating performance metrics posted in 2019, despite some deterioration in 2018, as shown in larger loss and combined ratios. As of December 2019, INS’ gross written premiums showed a year-over-year increase of 7.5%, mainly driven by compulsory workers’ compensation, in line with an improvement in the economic activity of Costa Rica’s insurance sector. Overall, INS produced positive net income. The outlook could be revised to stable should INS’ 2020 operating performance results deteriorate to levels more in line with an adequate operating performance assessment.

Investment income, based on a conservative investment portfolio, has benefited from interest rates and a prudent diversification strategy, and remains supportive of the company’s performance. Net income stood at USD 108 million at year-end 2019, providing a solid growth for its capital base, despite the compulsory 25% dividend paid to the government and a larger reserve creation derived from the favorable performance of the compulsory workers’ compensation segment.

AM Best expects INS to continue improving and consolidating its business guidelines by implementing its geographical diversification strategy progressively, which should offset increased competition in the voluntary segments. The company is in a good position to maintain its strongest risk-adjusted capitalization, as measured by BCAR, due to its good profitability, appropriate ERM practices and adequate reinsurance with highly rated international reinsurers, which provides a buffer for variations in claim severity and catastrophic events.

Positive rating movements could occur if INS is able to improve or maintain its underwriting performance and operating efficiency while continuing to pursue further diversification of its revenue, along with improving its return metrics and maintaining its strongest risk adjusted capitalization. Negative rating actions could occur if technical results deteriorate or if net income declines, given any loss that significantly affects the company’s profitability and/or capital base to levels that are no longer supportive of the current ratings.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all 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 see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

Olga Rubo, FRM
Financial Analyst
+52 55 1102 2720, ext. 134
olga.rubo@ambest.com

Alfonso Novelo
Senior Director, Analytics
+52 55 1102 2720, ext. 107
alfonso.novelo@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Contacts

Olga Rubo, FRM
Financial Analyst
+52 55 1102 2720, ext. 134
olga.rubo@ambest.com

Alfonso Novelo
Senior Director, Analytics
+52 55 1102 2720, ext. 107
alfonso.novelo@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com