MEXICO CITY--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Seguros El Roble, S.A. (El Roble) (Guatemala). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect El Roble’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The stable outlooks reflect AM Best’s expectation that the company will continue to perform in a profitable manner while preserving its capital position. In addition, the outlooks recognize El Roble’s capacity to face the gradual improvement in claims frequency while showing its technical capabilities for underwriting during 2021.
El Roble, which was established in 1972, is the largest insurer in Guatemala, with a market share of 26%. Its portfolio is composed mainly of non-life products (85%), as of December 2020, with the remainder (15%) tailored for the life insurance market. On a net basis, 44% of the company’s premium portfolio is distributed to the accidents and health line of business, with 33% in property/casualty lines and 23% in life insurance business. El Roble is owned by Bicapital Corporation, 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. El Roble ranks first in all of its Guatemala business lines.
AM Best views the company’s business profile as neutral, based on El Roble’s market leadership and its capacity to adjust the terms of its offerings through 2020 and into 2021 amid a recovering economy and the partial fadeout of the COVID-19 pandemic.
AM Best’s stable market segment outlook on Guatemala’s insurance industry recognizes that growth prospects still are limited due to the impact of the pandemic, but Guatemala’s macroeconomic fundamentals can provide the insurance system stability to mitigate the potential impact on claims from a gradual return to normalcy. In addition, the El Roble’s market-leading position has allowed it to outperform market growth rates continuously for the past 10 years while sustaining diversification in products and distribution channels.
El Roble’s balance sheet strength is assessed at the strongest level, as the availability and quality of its capital are well-positioned for the company’s risk profile. During 2020, risk-adjusted capitalization benefited as the company achieved a second record year of net results despite a substantial dividend payment; at the same time, risk requirements increased marginally with a growth in business volume during an atypical year for business generation industrywide. Historically, the reinsurance program and ERM capabilities of El Roble have been effective in protecting its balance sheet.
The operating performance of the company is assessed as strong due to its capacity to maintain constant growth in its net income backed up by solid underwriting. Strategic adjustments have allowed El Roble to navigate different cycles of the market. AM Best acknowledges that 2021 could be challenging, due to a slow economic recovery and a gradual normalization of claims frequency.
Positive rating actions could take place if 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 company’s operating performance 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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