MEXICO CITY--(BUSINESS WIRE)--AM Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” to Seguros El Roble, S.A. (El Roble) (Guatemala). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect El Roble’s balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The stable outlooks reflect AM Best’s expectation that the company will continue to perform in a profitable manner while preserving its capital position. It also recognizes El Roble’s capacity to face the expected slowdown in Guatemala’s insurance market, derived from the expected contraction of the country’s economy during 2020.
El Roble, which was established in 1972, is the largest insurer in Guatemala, with a market share of 24%. Its portfolio is composed mainly of non-life products (85%), as of December 2019, with the remainder (15%) tailored for the life insurance market. On a net basis, 40% of the company’s premium portfolio is distributed to the accidents and health line of business, with 39% in property/casualty lines and 21% in life insurance business. Bicapital Corporation (BIC), a Panama-based private financial group that has financial services operations, including banking, insurance and asset management, in Guatemala, Honduras, El Salvador, Bahamas, Panama and the United States, owns the El Roble. El Roble ranks first in all the segments that it commercializes in Guatemala.
AM Best views the business profile of the company as neutral, based on El Roble’s market leadership and its capacity to adjust the terms of its offerings through 2020 amid a slowing economy and the COVID-19 pandemic. AM Best’s stable market segment outlook on Guatemala’s insurance industry recognizes that growth prospects have become limited due to the effects of the COVID-19 pandemic, but that macroeconomic fundamentals provide stability to the system to mitigate the potential impact on claims and financial investments derived from the crisis. In addition, the company’s market leader position has allowed them to outperform growth in the market for the last 10 years in a continuous manner and sustain diversification in products and distribution channels.
El Roble’s balance sheet strength is assessed at the strongest level, as the availability and quality of the capital are well-positioned against the company’s risk profile. During 2019, risk-adjusted capitalization benefited as the company achieved a record year in net results despite a substantial dividend payment, while at the same time, risk requirements increased marginally with the growth of the business volume. Historically, the reinsurance program and ERM capabilities of El Roble have been effective in protecting the balance sheet of the company. However, given the exposure to natural catastrophes, both continue to be key factors for future rating assessments.
The operating performance of the company is considered strong due to its capacity to maintain a constant growth in its net income backed up by solid underwriting. Adjustments to its strategy has allowed El Roble to navigate through different cycles of the market. AM Best acknowledges that 2020 will be a year difficult for business, albeit muted in terms of expected claims, and will continue to monitor events that could harm claim costs given the company’s exposure to catastrophe events.
Positive rating actions could take place it the company continues to strengthen its capital base through its net results, derived from a profitable technical result. Negative rating actions could take place if the operating performance of the company renders negative results, either from deterioration in underwriting quality or market conditions. Negative rating actions also could take place if AM Best’s assessment of balance sheet strength is impacted unfavorably by macroeconomic conditions that affect the company, its parent or Guatemala.
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