AM Best Affirms Credit Ratings of Mercantil Seguros y Reaseguros, S.A.

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 Mercantil Seguros y Reaseguros, S.A. (Mercantil Seguros) (Panama). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Mercantil Seguros’ balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The stable outlooks reflect Mercantil Seguros’ capacity to maintain profitable metrics that strengthen and protect its capital base.

Mercantil Seguros is a Panama-based (re)insurer established in 2013, with gross premiums written mainly composed of health, which represents 90% of the portfolio, with the remaining risk distributed among property/casualty (P/C) lines of business. The company, which is part of Mercantil Group’s international companies and controlled by ultimate parent, Mercantil Servicios Financieros Internacional, S.A. (MSFI), operates in Panama through a network of brokers and direct distribution channels. Mercantil Seguros also serves as a retrocessionaire for reinsurance business sourced in Venezuela, driven by reinsurance brokers. At the same time, Mercantil Seguros’ size is relatively small among its Panama-domiciled peers.

Mercantil Seguros’ balance sheet strength is underpinned by its risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The strongest assessment also reflects the company’s well-structured reinsurance program among counterparties of strong credit quality, sound underwriting practices and conservative investment strategy. The company has consistently increased its capital, supported by positive bottom-line results and driven by a consistent inflow of underwriting and investment income.

Mercantil Seguros has shown sound underwriting practices, characterized by overall premium sufficiency levels. Additionally, consistent reinsurance profits, which help offset acquisition costs, continue to support the company´s profitability.

AM Best expects Mercantil Seguros’ current geographic diversification to further improve through distribution channel synergies provided by the overall organization in the near to midterm, enabling Mercantil Seguros to expand its Panama-sourced business while diminishing dependence on its Venezuelan-sourced business.

Factors that could lead to negative rating actions include deterioration of the group’s revenue or financial leverage at MSFI, hindering the group’s ability to service its debts and putting pressure on the financial strength of the insurance entities. Adverse underwriting performance that leads to a significant deterioration in Mercantil Seguros’ risk-adjusted capitalization, or political turmoil that affects Venezuela-sourced business, also could drive negative rating actions. While unlikely in the medium term, a factor that could result in positive rating actions is improvement in the credit profile of the group, as a result of sustained profitability strengthening the group’s capital base.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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