AM Best Revises Issuer Credit Rating Outlook to Positive for Aseguradora General, S.A.; Affirms Credit Ratings

MEXICO CITY--(BUSINESS WIRE)--AM Best has revised the outlook on the Long-Term Issuer Credit Rating (Long-Term ICR) to positive from stable and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term ICR of “bbb” (Good) of Aseguradora General, S.A. (AGen) (Guatemala). The outlook of the FSR is stable.

The Credit Ratings (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 (ERM).

The positive outlook on the Long-Term ICR reflects AM Best's expectation that the level of capital will remain supportive of the risk profile as the company’s dividend policy evolves.

AGen was established in 1967 and is the sixth-largest insurer operating in Guatemala. As of year-end 2021, the company reported USD 89 million in direct premium, with a market share of 6%. The company underwrites a mixed portfolio of life and non-life business, with its retained premium distributed among major medical expenses (60%), auto (15%), diverse property/casualty (P/C) offerings (13%), group life (8%) and universal life (4%). The business profile of the company is assessed at neutral, supported by its importance within 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 Luensi and a group of investors bought a 51% stake in May 2017.

As of December 2021, Guatemala ranked as the third-largest insurance market in Central America at USD 1.3 billion, expanding in real terms at an 8.4% rate annually, with good growth prospects for Guatemala’s economy given its macroeconomic stability.

AM Best considers AGen’s balance sheet strength to be at the strongest level. The company’s well-structured reinsurance program supports it capital base by properly limiting its exposure catastrophe events. In previous rating assessments, Luensi’s debt obligations placed negative pressure on AGen’s ratings by limiting its financial flexibility due to substantial dividend payments; however, debt has shifted to more manageable levels with good interest coverages, partially mitigating AM Best’s concern. AM Best considers AGen’s ERM practices to be appropriate as its management capabilities are sufficient to meet its risk appetite.

AM Best views the company’s operating performance as marginal. The result posted for 2021 reflects the challenges still present in the company given its exposure to affected personal lines segments. AM Best also recognizes the positive development of AGen’s P/C lines; nevertheless, it has not been sufficient to generate a favorable trend in its underwriting results in consideration of its operating performance assessment. Net income has remained positive for the past five years, strongly supported by revenue coming from deferred premium and premium issuance rights predominantly from the company’s major medical expenses offerings.

Positive rating actions could take place if the holding company continues to keep its debt at manageable levels, relieving pressure on the cash flow of AGen. Negative rating actions could take place if the company’s business profile limits its operating performance in terms of quality of underwriting and bottom-line results.

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