A.M. Best Affirms Credit Ratings of MAPFRE Panamá S.A.

Business Wire

MEXICO CITY--(BUSINESS WIRE)-- A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of MAPFRE Panamá S.A. (MAPFRE Panamá) (Panama City, Panama). The outlook of these Credit Ratings (ratings) remains stable.

The ratings reflect MAPFRE Panamá’s strong risk-adjusted capitalization and geographic importance to MAPFRE S.A. (MAPFRE Group) in the Central American market, as well as the integration of the MAPFRE Group’s practices and procedures into MAPFRE Panamá. The company improved its market position during 2015 and 2016 and ranked as Panama’s second largest insurer as of November 2016.

Offsetting these positive rating factors are the upward trend in the company’s loss ratio, the slow growth in Panama’s insurance industry and the competitive dynamics that persist in MAPFRE Panamá’s main business segments.

MAPFRE Panamá is the second-largest insurer in Panama’s life segment and the country’s third largest property/casualty writer. Panama’s insurance industry has gradually decelerated since 2015, finally reaching an almost nil growth during 2016. MAPFRE Panamá took advantage of the slowing conditions during this period and grew its business by 20.5% during 2015 and 7.2% in 2016.

MAPFRE Panamá’s solid capital base and good reserve position provide a solid base for financial flexibility and strong risk-adjusted capitalization levels. Enterprise risk management practices and procedures from the MAPFRE Group have been implemented; A.M. Best expects that these measures will continue to positively affect the company’s future performance.

Year-end 2015 and 2016 results show an upward trend in the company’s loss ratio due to its expansion efforts, negative market conditions for accidents and health given the high medical inflation rate faced by insurers, and by low investment yields used to support benefits paid on guaranteed rate life products. Net income for the company during 2016 remained at a similar level to 2015, mainly due to a significant release of long term provisions and consistent net investment income.

The strong competitive environment in Panama’s insurance market, especially in segments where MAPFRE Panamá has leading positions, continues to generate soft market conditions and increase risk appetites across the industry, presenting operating performance challenges in specific segments such as health and auto.

A.M. Best considers MAPFRE Panamá to be well-positioned at its current rating level. Positive rating actions could occur if the company is able to reverse the negative trend in underwriting quality and sustain it to further enhance its technical income, while consistently increasing its capital base. Additionally, positive rating actions at its ultimate parent could lead to improvements in MAPFRE Panamá ratings.

Negative rating actions could result from a significant reduction in MAPFRE Panamá’s risk-adjusted capitalization, either by constant deterioration in its underwriting performance or unexpected losses that render this measure to a level that no longer supports the current ratings, or if the company deviates significantly from the policies, practices and benefits assumed from its association with MAPFRE Group. Additionally, negative rating actions at its ultimate parent could lead to a downgrade of MAPFRE Panamá ratings.

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:

Analyzing Insurance Holding Company Liquidity (Version March 25, 2013)
Catastrophe Analysis in A.M. Best Ratings (Version Nov. 3, 2011)
Evaluating Country Risk (Version May 2, 2012)
Insurance Holding Company and 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. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, please refer to “Understanding Best’s Credit Ratings.”

Previous Rating Date: Jan. 13, 2016
Date of Financial Data Used: Dec. 31, 2016

This press release relates to rating(s) that have been published on A.M. Best's website. For additional 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 A.M. Best’s Recent Rating Activity web page.

A.M. Best does not validate or certify the information provided by the client in order to issue a credit rating.

While the information obtained from the material source(s) is believed to be reliable, its accuracy is not guaranteed. A.M. Best does not audit the company’s financial records or statements, or otherwise independently verify the accuracy and reliability of the information; therefore, A.M. Best cannot attest as to the accuracy of the information provided.

A.M. Best’s credit ratings are independent and objective opinions, not statements of fact. A.M. Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. A.M. Best’s credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions. View our entire notice for complete details.

A.M. Best receives compensation for interactive rating services provided to organizations that it rates. A.M. Best may also receive compensation from rated entities for non-rating related services or products offered by A.M. Best. A.M. Best does not offer consulting or advisory services. For more information regarding A.M. Best’s rating process, including handling of confidential (non-public) information, independence, and avoidance of conflicts of interest, please read the A.M. Best Code of Conduct.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

View source version on businesswire.com: http://www.businesswire.com/news/home/20170203005619/en/

A.M. Best

Elí Sánchez, +52 55 1102 2720, ext. 108

Financial Analyst

eli.sanchez@ambest.com

or

Alfonso Novelo, +52 55 1102 2720, ext. 107

Director, Analytics

alfonso.novelo@ambest.com

or

Christopher Sharkey, +1 908-439-2200, ext. 5159

Manager, Public Relations

christopher.sharkey@ambest.com

or

Jim Peavy, +1 908-439-2200, ext. 5644

Director, Public Relations

james.peavy@ambest.com