The ratings of PPS reflect its excellent market share in Peru’s property/casualty (P/C) market, as well as its strong risk-adjusted capitalization backed up by a comprehensive and well-diversified reinsurance program. Additionally, the ratings also recognize the improving trend in profitability driven by adjustments in its business strategy implemented by its seasoned management team.
PPS is an operating holding company underwriting P/C and life business through its subsidiary, PV. The consolidated business portfolio is comprised of 47% life and 53% P/C. The group stands as the second largest insurer in
During 2015, PPS was able to achieve premium sufficiency due to an improved operating expense ratio resulting from a stringent cost containment strategy and lower claims driven by underwriting adjustments as a result of management’s efforts to boost profitability. Additionally, the company’s stable flow of revenue from financial income helped it achieve its highest return on premium of the past five years at 23% and an excellent return on equity (ROE) of 23.9%.
The capital position of PPS is strong and has strengthened significantly on the positive results reported and constant capitalization of profits, which increased paid-in capital by 27% during 2015. This is reflected in strong risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), which is also supported by a solid reinsurance program set with diverse highly rated participants.
Positive rating actions could take place if the company is able to maintain its premium sufficiency in the following years while materially improving its risk-adjusted capitalization. Negative rating actions could take place if the company’s underwriting results weaken or if capital erodes to levels that no longer support the net required capital for the risks the company faces.
On the other hand, PV, the second largest life insurance company in
Positive rating actions could take place if PV is able to maintain its profitable operating performance and further strengthen its capital base to levels similar to more highly rated companies. Negative rating actions could result if the company's profitability deteriorates constantly from weakened underwriting or a more aggressive risk appetite that ultimately leads to a sharp reduction in risk-based capitalization.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Catastrophe Analysis in A.M. Best Ratings (Version
Nov. 3, 2011)
- Equity Credit for
Hybrid Securities(Version April 2, 2014)
- Evaluating Non-Insurance Ultimate Parents (Version
Feb. 24, 2012)
- Evaluating Country Risk (Version
May 2, 2012)
Insurance Holding Companyand Debt Ratings (Version May 6, 2014)
- Rating Members of Insurance Groups (Version
Dec. 15, 2014)
- Risk Management and the Rating Process for Insurance Companies (Version
April 2, 2013)
- Understanding Universal BCAR (Version
April 28, 2016)
View a general description of the policies and procedures used to determine credit ratings. Also in accordance with Mexican regulations, the following is a link to required disclosures – A.M. Best America Latina Supplementary Disclosure. For information on the structure, voting and the committee process for determining the ratings and monitoring activities please refer to “Understanding Best’s Credit Ratings.”
- Previous Rating Date: Not rated.
- Date of Financial Data Used:
June 30, 2016.
This press release relates to rating(s) that have been published on
While the information obtained from the material source(s) is believed to be reliable, its accuracy is not guaranteed.
A.M. Best’s credit ratings are independent and objective opinions, not statements of fact.
Copyright © 2016 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.
Elí Sánchez, +52 55 1102 2720, ext. 108
Senior Financial Analyst
Director of Analytics
Manager, Public Relations
Assistant Vice President, Public Relations