MEXICO CITY--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Aseguradora General, S.A. (AGen) (Guatemala). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect AGen’s balance sheet strength, which AM Best assesses as strongest, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management.
The stable outlooks reflects AM Best’s expectation that the company’s prudent capital management will allow current balance sheet strength to continue amid a gradual increase in claim frequency and a slow economic recovery.
AGen was established in 1967 and is the fourth-largest insurer operating in Guatemala. As of year-end 2020, the company reported USD 84.5 million in direct premium, with a market share of 8.1%. The company underwrites a mixed portfolio of life and non-life business, with its retained premium distributed among major medical expenses (68%), auto (16%), group life (6%), diverse property/casualty offerings (7%) and universal life (3%). The business profile of the company is assesses as neutral, supported by its importance in its domestic market but limited by its geographic and product concentration.
The company’s majority shareholder is Luensi, S.A. (Luensi) (Guatemala), a pure holding company with investments in insurance, real estate and banking. Assicurazioni Generali S.p.A. previously owned AGen, but in May 2017, Luensi and a group of investors bought a 51% stake.
As of December 2020, Guatemala ranked as the third-largest insurance market in Central America at USD 1 billion, expanding in real terms at a 1% rate annually, with good growth prospects for Guatemala’s economy as the impact of the pandemic has been mitigated partially by countercyclical economic policies.
AM Best considers AGen’s balance sheet strength to be at the strongest level. Supporting the capital base is a well-structured reinsurance program that properly limits the exposure of its capital base to catastrophic events. The holding company places negative pressure on AGen’s ratings by limiting its financial flexibility due to substantial dividend payments to Luensi. AGen’s ERM practices are considered appropriate as its management capabilities are sufficient to meet its risk appetite.
AM Best views the company’s operating performance as marginal, recognizing that despite results posted in 2020, claims experience could revert gradually in 2021 to pre-pandemic levels, and growth in premiums still needs to recover amid a challenging economic environment. Net income has remained positive for the last five years, strongly supported by revenue coming from deferred premium and premium issuance rights predominantly from the major medical expenses offerings of the company.
Positive rating actions could take place if financial leverage at the holding company diminishes and is less dependent on the dividends of AGen to meet its financial obligations. Negative rating actions could take place if the business profile of the company limits its operating performance in terms of quality of underwriting and bottom-line results. Negative rating actions could also take place if there are significant capital outflows, including dividends that in AM Best’s opinion limit the capacity of the company’s capital base to face its risks.
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