AM Best Affirms Credit Ratings of Aseguradora Ancón, S.A.

MEXICO CITY--(BUSINESS WIRE)--
AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Aseguradora Ancón, S.A. (Ancón) (Panama). The outlook of the Credit Ratings (ratings) is stable.

The ratings reflect Ancón’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

Ancón´s balance sheet strength is underpinned by risk-adjusted capitalization at an assessed level of strongest, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by a well-structured reinsurance program, which covers the company’s different business lines, and sound underwriting practices. Offsetting these positive rating factors is the slow dynamism of Panama’s insurance market in recent years and the strong competition Ancón faces in its main segments.

Ancón is the seventh-largest insurer in Panama, with a market share of 3.1% as of December 2020. Property/casualty insurance products comprise 65.4% of its business portfolio, with the remaining 34.6% made up of life products, including accident and health. The company’s main segments are auto and health, representing 44% and 27%, respectively, of its gross premiums written. The company has two subsidiaries in Puerto Rico: Multinational Insurance Company (Multinational), a property/casualty insurer, and Multinational Life Insurance Company (Multinational Life), a life insurance company. Ancón’s risk-adjusted capitalization follows a positive trend, which has been driven by consistent profitability, the result of a prudent business strategy in terms of retention and growth, the aforementioned reinsurance program set with highly rated reinsurers and shareholder commitment, as reflected by a USD 14 million capital contribution from its holding company, Ancon Investment Corporation. This contribution stemmed from the holding company issuing a series of preferred shares in third-quarter 2020. The result of capital contribution enhanced Ancón´s risk-adjusted capitalization level to strongest at year-end 2020. In AM Best’s view, this parental support has provided Ancón with an optimized capital structure through a reduced level of financial leverage. In addition, risk-based capital faces reduced pressure from equity risk following the spinoff of subsidiaries investments in 2021. In the midterm, AM Best expects Ancón to maintain its balance sheet strength assessment of strongest.

Improvements in auto underwriting in recent years, in conjunction with Ancón’s decision to optimize its catastrophic reinsurance coverage, allowed the company to maintain a combined ratio below 100% and remain profitable. Ancón’s underwriting performance, partially undermined by deviations in public transportation claims during 2019, has taken advantage of pricing adjustments, de-selection of unprofitable business, underwriting inspectors and 2020 quarantine measures to contain development of auto claims. These efforts supported consistent underwriting performance and profitability, as reflected by a 90.5% combined ratio and a 2.5% return on equity in 2020.

Positive rating actions are not likely in the short term; however, sustained improvements in underwriting performance will be key for future revisions. Negative rating actions could take place if risk-adjusted capitalization deteriorates as a result of capital outflows or capital consuming losses.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Salvador Smith
Senior Financial Analyst

+52 55 1102 2720, ext. 109

salvador.smith@ambest.com

Christopher Sharkey
Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Eli Sanchez
Associate Director, Analytics

+52 55 1102 2720, ext. 108

eli.sanchez@ambest.com

Jim Peavy
Director, Communications

+1 908 439 2200, ext. 5644

james.peavy@ambest.com

Source: AM Best