AM Best Assigns Credit Ratings to Mercantil Reaseguradora Internacional, S.A.

Business Wire

MEXICO CITY--(BUSINESS WIRE)-- AM Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb” to Mercantil Reaseguradora Internacional, S.A. (Mercantil Re) (Panama). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect Mercantil Re’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

Mercantil Re is the wholly owned start-up reinsurer of Mercantil Seguros y Reaseguros, S.A., part of Mercantil Group’s international companies controlled by ultimate parent Alvina Corporation, which provides synergies and operating efficiencies. The company was established this year in Panama with the main purpose of supporting group’s regional expansion throughout Latin America.

Balance sheet strength is underpinned by a strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), also supported by a well-structured reinsurance program placed with highly rated retrocessionaries, and a conservative investment strategy aimed at providing liquidity and maintaining appropriate asset-liability management. Additionally, the company’s ERM framework is considered appropriate as it benefits from the group’s guidelines and expertise.

In AM Best’s view, Mercantil Re’s operating performance reflects expenses and dependence upon investment income, accordingly to the company’s start-up nature. However, AM Best expects underwriting performance to support profitability in the short term, driven by management’s track record in underwriting practices and a diversified reinsurance structure.

Additionally, Mercantil Re’s limited business profile reflects the company’s execution risk driven by its expansion strategy and a strong competitive environment in its target geographic markets.

Positive factors that might improve the rating level or outlooks include targeted geographic premium distribution with good-quality underwriting, which supports profitability and the very strong balance sheet assessment. Factors that could lead to negative rating actions include adverse financial performance that leads to a significant deterioration in its risk-adjusted capitalization.

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 Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

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