Fitch Affirms Rimac (Peru) IFS Rating at ‘BBB’; Outlook Stable

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed Rimac Internacional Compania de Seguros y Reaseguros S.A. (Rimac) Insurer Financial Strength (IFS) ratings at 'BBB'. The Rating Outlook is Stable.

The ratings affirmation reflect Rimac's leading position in a highly concentrated market, competitive performance, its strong capitalization and moderate risk exposure of investment portfolio. This is partially offset by its dependence on Peru's insurance industry and a lower diversification of its shares investment portfolio.

Rimac concentrated 33.99% of gross written premium (GWP) at June 2012 and maintains a diversified business mix. Its profitability ratios remain competitive compared with domestic and regional peers, despite its net earning slowdown (-37.6%) due to a temporary spike in loss ratio since late 2011, reaching a return-on-average equity ratio of 14.7%. Fitch expects that Rimac could resume its historical profitability in the short term due to the underwriting actions taken by its management.

Rimac's strong capitalization is supported by a consistent and progressive enhancement of its shareholders' equity (PEN1.146 million at June 2012 on a consolidated basis), mainly driven by an ample earnings capitalization policy in the last several years. Rimac experienced a net income slowdown and larger dividend distribution during the first half of 2012. However, it could potentially still see short-term GWP growth as its leverage ratios remain stable and comparatively lower than its peers.

As of June 2012, Rimac's unearned premiums-to-equity ratio was 1.5x and total liabilities-to-equity ratio was 3.96x, reflecting an adequate leverage position considering that 59.0% of its technical reserves is annuities reserves.

Rimac is an important part of Brescia Group, one of the largest financial and economic groups in Peru. Fitch believes that the company's growth strategy has been consistent over time, and benefits from the business synergies from subsidiaries and related entities. These synergies give plenty of room for higher penetration, cross selling, and operational advantages, particularly considering the growing strategic plan in the health care segment and the strong market position of 'BBVA Continental' bank and 'AFP Horizonte', both related to Rimac.

Rimac maintains a conservative investment portfolio allocation and has the ability to withstand potential near-term volatility and investment losses without a material impact on the company's capitalization. The portfolio primarily consists of investment grade fixed income securities, with limited exposure to below investment grade securities and also follows an adequate asset/liability risk management. Its non-related equity investment portfolio represents a moderate exposure of its total shareholders' equity (0.32x at June 2012) and maintains a limited issuer diversification.

Key rating triggers that may lead to an upgrade include:

--Sustained improvement of its main performance ratios, especially its operating ratio below 85%; while its leverage ratio falls below 3.0x.

Key rating triggers that may lead to a downgrade include:

--The company's inability to post profits similar to its recent past ROAA (above 4%); and/or

--A deterioration of its leverage beyond 5x;

--A change in the credit risk profile of its investment portfolio.

Fitch has affirmed the following ratings:

Rimac Internacional Compania de Seguros y Reaseguros S.A.

--IFS at 'BBB'.

The Rating Outlook is Stable.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Sept. 22, 2011).

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651018

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Fitch Ratings
Primary AnalystFranklin SantarelliManaging Director
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Media RelationsElizabeth Fogerty+1-212-908-0526
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Source: Fitch Ratings