Press Release - OCTOBER 18, 2019
AM Best Affirms Credit Ratings of Aseguradora Ancón, S.A.
FOR IMMEDIATE RELEASE
MEXICO CITY - OCTOBER 18, 2019
The ratings reflect Ancón’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management.
Ancón maintains risk-adjusted capitalization at an assessed level of very strong, supported by a well-structured reinsurance program that covers the company’s different business lines, as well as a stable loss ratio. 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 sixth-largest insurer in Panama, with a market share of 3.4% as of June 2019. Property/casualty insurance products compose 65.7% of its business portfolio, with the remaining 34.3% made up of life products, including accident and health. The company’s main segments are auto and health, representing 49% and 27%, respectively, of its gross written premiums. The company holds two subsidiaries in Puerto Rico: Multinational Insurance Company (Multinational), a property/casualty insurer, and Multinational Life Insurance Company (Multinational Life), a life insurance company.
In 2017, the company’s combined ratio deteriorated, derived from lower commissions from ceded premiums; however, Ancón maintained a stable loss ratio and continued to benefit from reserve releases that started in 2014. By 2018, claims expenses had diminished, driven by improvements in auto underwriting, and this enabled the company to record a stable combined ratio below 100% for the year. Moreover, Ancon’s decision to optimize its catastrophic reinsurance coverage also allowed the company to maintain overall profitability in 2018. AM Best expects the company to maintain a contained development of its auto business claims in order to support further positive bottom-line results.
The prudent business strategy in terms of retention and growth has allowed Ancón to maintain stable levels of required capital while producing positive results and growth of its reported surplus. A comprehensive reinsurance program set with highly rated reinsurers further supports Ancón’s risk-adjusted capital.
Panama’s insurance market so far in 2019 has shown gradual improvements, and as of June 2019, it has grown by 6.6% on a year-to-year basis. Opportunities still are limited given the lack of dynamism in certain sectors (e.g., infrastructure projects); however, AM Best expects Ancón to maintain a steady underwriting performance based on its current strategy, as evidenced by its loss ratio of 51.8% as of June 2019, in line with the loss ratio recorded at year-end 2018.
Positive movement in Ancón’s ratings or outlooks could take place if the company continues to implement its strategy in a profitable manner with continued support from its strong reinsurance program and stable levels of risk-adjusted capitalization. Negative rating actions could occur if the company’s operating results show a negative trend of sustained losses that affect its capitalization or business profile.
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.
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.
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