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FOR IMMEDIATE RELEASE
MEXICO CITY - DECEMBER 06, 2019 11:21 AM (EST)
AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Pacífico Compañía de Seguros y Reaseguros S.A. (PCS) (Lima, Perú).
The ratings reflect PCS’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).
The revision of the outlooks to positive reflects the gradual strengthening of PCS’ balance sheet after achieving capital efficiencies from the consolidation of its property/casualty (P/C) and life operations, as well as improving economic conditions in Peru. AM Best expects that the company’s risk-adjusted capitalization will remain supported by its appropriate ERM.
The ratings of PCS also reflect the company’s strong market share in Peru’s insurance market, as well as its comprehensive and well-diversified reinsurance program. Limiting the ratings is Peru’s competitive landscape within the company’s key segments such as auto, health and life, which have a limited number of insurers when compared with more developed insurance markets.
PCS is Peru’s second-largest insurer with a market share of 26.2%. As of October 2019, the company’s business portfolio was composed of 53% life and 47% non-life. Its ultimate parent is Peru’s largest financial holding company, Credicorp Ltd. [NYSE: BAP], which had USD 52.6 billion in assets as of December 2018.
After two years of consolidating its life and property/casualty (P/C) business into PCS, the company has maintained its risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). PCS benefits from risk mitigation achieved through diversification and a robust and comprehensive reinsurance program with highly rated reinsurers.
PCS has maintained adequate operating performance, with life-side investment products contributing to the result, while P/C products have performed significantly well with positive technical results despite a lower level of new car sales in the auto segment. Historically, the company has reported healthy growth rates despite diverse market events in recent years.
Positive rating actions could take place if the company is able to maintain its risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio, supported by consistent operating results and appropriate ERM.
Negative rating actions could take place if the company’s underwriting results weaken due to relaxed underwriting standards or a more aggressive risk appetite that could erode capital to levels that no longer support the net required capital for the risks the company faces.
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:
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: Dec. 14, 2018
• Date Range of Financial Data Used: Dec. 31, 2013-Oct. 31, 2019
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