MEXICO CITY--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Seguros Universales, S.A. (Universales) (Guatemala). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Universales’ balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The stable outlooks reflect AM Best’s expectation that the company will maintain a stable capital base as the dynamics in the insurance market in Guatemala evolve after a gradual return to normalcy from the COVID-19 pandemic.
Universales, which was established in 1962, is the sixth-largest insurer in Guatemala, with a market share of 8%. Its portfolio as of August 2021 is composed mainly of non-life products (78%), with the remainder (22%) directed to life insurance market. The company holds very competitive positions in the property/casualty (P/C) and accident and health segments, ranked No. 4 and No. 5, respectively. The company is owned privately by a group of 10 shareholders, none with a stake larger than 23%.
AM Best views Universales’ business profile as neutral, based on the company’s market position and its ability to develop niche markets through commercial alliances, distribution channels and development of new offerings. 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 digitalization and ERM efforts are allowing the company to navigate the ongoing economic cycle successfully.
AM Best assesses Universales’ balance sheet strength as very strong, due to the availability and quality of the capital, reinsurance protection and conservative risk profile. The company’s consistent profitable results are reflected in a growing capital base with a conservative risk profile and well-structured dividend payments. The company has set a reinsurance program based on a mixture of treaty and facultative programs with highly rated reinsurers, which historically have been effective in protecting the company’s balance sheet.
AM Best views Universales’ operating performance as marginal due to its dependency on other technical income and investment results to post positive bottom-line results, as its combined ratio has been consistently above 100. In 2020, the company adjusted its offerings in terms of price and coverages, which helped it to improve its loss ratio; however, administrative expenses continue to limit its performance. During 2021, Universales’ net result continue to perform similarly to year-end 2020; nevertheless, the company has won the tender for important policies in the Guatemalan market that could help operating performance in the medium term.
Positive rating actions could take place if there is a stabilization of Universales’ balance sheet strength and if operating performance improves in a consistent and sustained way in the medium term. Negative rating actions could take place if the company’s capital base deteriorates as a consequence of an unsuccessful strategy affecting results and the undertaking of risks.
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