MEXICO CITY--(BUSINESS WIRE)--AM Best has upgraded the Financial Strength Rating to A (Excellent) from A- (Excellent) and the Long-Term Issuer Credit Rating to “a” (Excellent) from “a-” (Excellent) of Seguros Suramericana S.A. (Sura) (Panama). The outlook of these Credit Ratings (ratings) has been revised to stable from positive.
The ratings reflect Sura’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.
The rating upgrades reflect the sustained improvement in Sura’s risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), following the paid-in capital restructuring that took place as a part of the merger between Sura’s intermediate insurance holding companies.
Sura’s balance sheet strength is also supported by a well-structured reinsurance program and synergies provided by Grupo de Inversiones Suramericana S.A. (Grupo Sura), a leading Colombia-based financial services company in the Latin American insurance, asset management and banking industries, as well as sound underwriting performance, initially driven by its previous integration with Seguros Banistmo, S.A. in 2015. Offsetting these positive rating factors is Panama’s highly competitive landscape, which could pressure Sura’s operating performance.
As of May 2021, the company was the fifth-largest insurer in Panama, with a market share of 9%; 69% of its business portfolio is composed of non-life products, with life products making up the remaining 31%. Sura’s main property/casualty business segment is auto, which represents 38% of its gross written premium.
Grupo Sura’s initiative in 2018 to optimize shareholder value through the merger of intermediate insurance holding companies, Suramericana S.A. and Inversura Panamá Internacional S.A., drove a stock split transaction for its subsidiary, Aseguradora Suiza Salvadoreña, S.A. This further enhanced Sura’s risk-adjusted capitalization, which was already at the strongest level. Sura’s capital base continues to be driven by its value-based management model and is reinforced consistently through profitability and a prudent dividend policy, while meeting the group’s post-merger return on investment goals. AM Best expects Sura to follow consistent capital management guidelines supportive of its ratings. Additionally, the company’s balance sheet strength is supported by a comprehensive reinsurance program, set with reinsurers that have excellent security, as well as the implementation of an internal economic capital model.
Sound underwriting practices, coupled with post-merger synergies that continue to contain administrative costs, have driven Sura’s strong operating performance as reflected in profitability metrics, characterized by an 84% combined ratio at year-end 2020. In addition, the company’s business profile continues to benefit in terms of added diversification and synergies, such as the bancassurance distribution channel. As of June 2021, Sura presents an increase in the loss ratio, mainly due to the life business lines. The company expects a decrease in the claims for year-end 2021, and improved performance in 2022.
Positive rating actions are not expected in the medium term. However, negative rating actions could occur if the company's risk-adjusted capitalization deteriorates to a level no longer supportive of the current ratings as a result of deviations in the dividend policy or operating performance trends.
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