A.M. Best Assigns Credit Ratings to Seguros Suramericana S.A.

A.M. Best Assigns Credit Ratings to Seguros Suramericana S.A.

(Panama Business News). A.M. Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” to Seguros Suramericana S.A. (Sura) (Panama). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect Sura’s good risk-adjusted capitalization supported by a well-structured reinsurance program, parental support provided by Grupo de Inversiones Suramericana S.A. (Grupo Sura), and improved underwriting metrics that continue to be driven from its integration with Seguros Banistmo, S.A. (Seguros Banistmo) in 2015. Offsetting these positive rating factors is Panama’s highly competitive landscape, which could pressure Sura’s operating performance.

As of year-end 2016, the company stood as the fourth-largest insurer in Panama, with a market share of 9%. Sixty-eight percent of its business portfolio is composed of property/casualty (P/C) products, with life products making up the remaining 32%. Its main P/C business segment is auto, which represents 33% of its gross written premiums. The acquisition of Seguros Banistmo was led in 2015 by Grupo Sura, a leading Colombian financial services company in the Latin American insurance, asset management and banking industries. As of 2016, no integration risks derived from the transaction had emerged.

Sura’s risk adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is supportive of the ratings, and the company’s capital base is reinforced mainly through improved profitability. Derived from the group’s post-merger return on investment goals, A.M. Best expects Sura to rely on its value-based management model to support a prudent dividend policy that enables the company to maintain an adequate capital management supportive of current capital adequacy levels. Sura’s balance sheet strength also is supported by a comprehensive reinsurance program set with reinsurers that have excellent security.

Sura’s operating performance further improved in 2016 as a result of the merger with Seguros Banistmo, mainly by taking advantage of synergies that diminished administrative costs, ultimately leading to a combined ratio of 81% at year-end 2016. Moreover, an improvement in the company’s investment results supported positive bottom-line results. In addition, the business profile benefited from the merger in terms of added diversification. In 2017, A.M. Best expects Sura to maintain its current performance by taking advantage of the merger’s business portfolio optimization and synergies, such as the bancassurance distribution channel.

Positive changes in the ratings or outlooks could take place if the company continues to maintain its post-merger performance and profitability, leading to higher levels of risk-adjusted capitalization. Negative rating actions could occur if the expected operating performance deviates considerably and weakens as a result of Panama’s highly competitive environment affecting the company’s risk-adjusted capitalization or business profile.

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