AM Best


AM Best Assigns Credit Ratings to Mercantil Seguros y Reaseguros, S.A.


CONTACTS:

Salvador Smith
Financial Analyst
+52 55 1102 2720, ext. 109
salvador.smith@ambest.com

Alfonso Novelo
Senior Director, Analytics
+52 55 1102 2720, ext. 107
alfonso.novelo@ambest.com
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

MEXICO CITY - JULY 17, 2019 03:06 PM (EDT)
AM Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb” to Mercantil Seguros y Reaseguros, S.A. (Mercantil Seguros) (Panama). The outlook assigned to the Credit Ratings (ratings) is stable.

The ratings reflect Mercantil Seguros’ balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

Mercantil Seguros’ balance sheet strength is underpinned by its risk-adjusted capitalization, as measured by Best´s Capital Adequacy Ratio (BCAR), which is at the strongest level. The ratings also reflect the company’s well-structured reinsurance program, sound underwriting practices and conservative investment strategy. Partially offsetting these positive rating factors is Mercantil Seguros’ relatively small size within Panama´s insurance industry.

Mercantil Seguros is a Panama-based (re)insurer established in 2013, with net premiums written composed of health (66%), auto (22%) and miscellaneous (12%), as of 2018. The company, which is part of Mercantil Group’s international companies, controlled by ultimate parent Alvina Corporation, operates in Panama through a network of brokers and direct distribution channels. Mercantil Seguros also performs as a retrocessionaire for reinsurance business sourced in Venezuela, driven by reinsurance brokers.

Mercantil Seguros’ risk-adjusted capitalization stands at the strongest level and is supportive of its ratings. Historically, the company has increased capital at a 50% compound annual growth rate supported by positive bottom-line results, driven by a consistent inflow of underwriting and investment income, and a capital infusion. A well-balanced reinsurance program placed among counterparties of strong credit quality also reinforces the company’s risk-adjusted capitalization.

In AM Best´s view, Mercantil Seguros has shown sound underwriting practices characterized by overall premium sufficiency levels. A combined ratio of 60% in 2018 was enabled through well-underwritten risks by group companies, thus containing claims expenses. Additionally, consistent reinsurance profits, which offset acquisition costs, continue to support the company´s profitability, as evidenced by a return on equity and return on assets of 32.1% and 22.9%, respectively, in 2018.

AM Best expects the company’s current geographic diversification to further improve through distribution channel synergies provided by the overall organization in the near to midterm, enabling Mercantil Seguros to expand its Panama-sourced business.

Positive factors that could result in positive rating action include improvements in geographic diversification in combination with sustained profitability, while maintaining risk-adjusted capitalization at the strongest level. Factors that could lead to negative rating action include protracted adverse underwriting performance that leads to a significant deterioration in its risk-adjusted capitalization.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of AM 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:


  • Available Capital & Holding Company Analysis (Oct. 13, 2017)

  • Catastrophe Analysis in A.M. Best Ratings (Version Oct. 13, 2017)

  • Evaluating Country Risk (Version Oct. 13, 2017)

  • Understanding Universal BCAR (Version May 23, 2019)

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: Not rated

  • Date Range of Financial Data Used: Dec. 31, 2014- April 30, 2019

This press release relates to rating(s) that have been published on AM 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 AM Best’s Recent Rating Activity web page.

AM 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. AM Best does not audit the company’s financial records or statements, or otherwise independently verify the accuracy and reliability of the information; therefore, AM Best cannot attest as to the accuracy of the information provided.

AM Best’s credit ratings are independent and objective opinions, not statements of fact. AM 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. AM 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.

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