Press Release - NOVEMBER 01, 2019

AM Best Affirms Credit Ratings of Reaseguradora Patria, S.A.


CONTACTS:
 Elí Sánchez
Associate Director
+52 55 1102 2720, ext. 122
eli.sanchez@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 - NOVEMBER 01, 2019
AM Best has affirmed the Financial Strength Rating of A (Excellent), the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” and the Mexico National Scale Rating of “aaa.MX” of Reaseguradora Patria, S.A. (Patria Re) (Mexico). AM Best also has affirmed the Long-Term ICR of “bbb” of Patria Re’s ultimate parent, Peña Verde, S.A.B. (Peña Verde) (Mexico). The outlook of these Credit Ratings (ratings) is stable. Per AM Best’s criteria procedure on insurance holding companies, Peña Verde’s Long-Term ICR reflects a standard notching from Patria Re’s Long-Term ICR and is in line with companies of the same rating level.

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

Patria Re’s balance sheet strength assessment of strongest is supported by the same assessment on its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), low underwriting leverage, robust reinsurance program, as well as the company’s strong liquidity metrics. The ratings also reflect its comprehensive ERM infrastructure and expansive knowledge of its core markets in Latin America, which is reflected in the company’s smooth implementation of its expansion strategy with a stable overseas operation outside its niche market.

Partially offsetting these strengths is Patria Re’s 2018 negative net income, impacted by the negative valuation of investments despite improvements in underwriting quality. Concerns still exist related to the important role of equities in its investment portfolio and some catastrophe-prone lines of business, which could create volatility in the company’s operating performance.

Patria Re has established a solid niche position in Mexico and Latin America, which allows it to accept profitable business selectively while maintaining a diversified product portfolio tailored to specific markets. This strategy has resulted in consistently favorable underwriting results over the years and has contributed to Patria Re’s enhanced risk-adjusted capitalization. A well-balanced reinsurance program placed among counterparties with a strong security level also reinforces the company’s risk-adjusted capitalization. Furthermore, the company’s underwriting leverage has remained at conservative levels for the past five years.

As of June 2019, the company registered a positive bottom line result, mainly driven by improved investment results. The company’s efforts to maintain stable claims and management expenses, coupled with strong underwriting practices, will remain key to maintain a profitable profile.

During 2018, Patria Re reported a portfolio deficit due to the valuation of stocks as volatility in the markets affected some of its equities. While the company has maintained such positions historically and kept a long-term investment horizon for these assets, a more prudent approach has taken place due to current uncertain economic atmosphere.

AM Best considers Patria Re to be well-positioned at its current rating level. Factors that could lead to positive rating actions include continued strong underwriting and overall results in conjunction with maintaining the strongest risk-adjusted capitalization, improvements in the performance of its investment portfolio, as well as continued and successful operation of its overseas expansion. Factors that may lead to negative rating actions include a sustained decline in underwriting profitability, significant deterioration in risk-adjusted capitalization and unsuccessful execution of the company’s overseas expansion plans.

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:


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

  • Understanding Universal BCAR (Version May 23, 2019)

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

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

  • A.M. Best´s Ratings on a National Scale (Version Oct. 13, 2017)

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: October 11, 2018

  • Date Range of Financial Data Used: December 31, 2014-June 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.

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


Related Companies

For information about each company, including the Best's Credit Reports, group members (where applicable) and news stories, click on the company name. An additional purchase may be required.

AMB# Company Name
033224 Peña Verde, S.A.B.
086054 Reaseguradora Patria, S.A.