A.M. Best Upgrades Credit Ratings of Solunion Seguros, Compañía Internacional de Seguros y Reaseguros S.A.

LONDON--(BUSINESS WIRE)-- A.M. Best has upgraded the Financial Strength Rating (FSR) to A (Excellent) from A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a” from “a-” for Solunion Seguros, Compañía Internacional de Seguros y Reaseguros S.A. (Solunion) (Spain). The outlook of these Credit Ratings (ratings) remain stable.

Solunion is the operating holding company of the Solunion group of companies, a 50-50 joint venture established in 2013 between MAPFRE GLOBAL RISKS, Compañía Internacional de Seguros y Reaseguros S.A., a wholly owned subsidiary of MAPFRE S.A. (MAPFRE), and Euler Hermes Luxembourg Holding S.à.r.l., a subsidiary of Euler Hermes Group SA (Euler Hermes). Allianz SE is the ultimate parent of Euler Hermes.

The ratings reflect Solunion’s balance sheet strength, which A.M. Best categorises as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also factor in strategic and operational support from its joint shareholders. In addition, Solunion benefits from substantial parental support in the form of a 90% quota share arrangement and excess of loss protection, along with its shareholders’ commitment to sustain its capital position above the regulatory requirements.

The upgrade of the ratings reflects A.M. Best’s view that the importance of Solunion to its joint shareholders, as their exclusive writer of trade credit insurance business in Spain and Latin America (excluding Brazil), has been demonstrated since its inception in 2013. Over the past 5 years, Solunion has received substantial explicit parental support and has become more closely integrated with the operations of its shareholders. In addition, the company has strengthened its reputation in its core markets and improved its operating earnings.

Solunion’s balance sheet strength is underpinned by its risk-adjusted capitalisation being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), a prudent reserving approach and conservative investment and reinsurance strategies. The company maintains capital buffers to cushion against the effects of a heightened insolvency environment. A.M. Best expects Solunion to maintain a prudent capital management strategy to support its strategic expansion plans.

Although the company’s performance was mixed during its first years of operation, there has been a steady improvement in the technical and investment returns. The results in the first half of 2018 are positive and benefit from the introduction of the new bonding insurance business. Headwinds for prospective performance include uncertainty around the sustainability of the trade credit results given the high level of competition, and the pressure that years of relatively low claims experience has placed on rates and terms and conditions.

Solunion is able to leverage the expertise and capabilities of Euler Hermes, the leading global trade credit insurer, whilst accessing MAPFRE’s widespread and established distribution channels in its target markets, particularly in Latin America. In 2018, after several years of growing its trade credit insurance business, the company has started writing bonding business directly in Spain and Latin America as a reinsurer. Although this has further diversified Solunion’s product offering, A.M. Best believes that the company will continue to face difficult market conditions as it executes its strategic plan, given the competitive dominance of larger market participants, pressure on rates and increased exposure to countries with higher country risk.

This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

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A.M. Best

Jessica Botelho, CA

Financial Analyst

+44 20 7397 0310

jessica.botelho@ambest.com

or

Mahesh Mistry

Senior Director, Analytics

+44 20 7397 0325

mahesh.mistry@ambest.com

or

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

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Jim Peavy

Director, Public Relations

+1 908 439 2200, ext. 5644

james.peavy@ambest.com

Source: A.M. Best