Best’s News & Research Service - January 23, 2020 02:20 PM (EST)
AM Best Removes From Under Review With Negative Implications and Affirms Credit Ratings of Acerta Compañia de Seguros, S.A.
- January 23, 2020 02:20 PM (EST)
Mexico City //BestWire// - AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating (FSR) of B+ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb-” of Acerta Compañia de Seguros, S.A. (Acerta) (Panama). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Acerta’s balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, neutral business profile and marginal enterprise risk management (ERM).
The ratings also recognize Acerta’s affiliation to Grupo Prival, S.A., its ultimate parent, following management´s decision to reduce pressure in the regulatory capital requirement of its main financial institution, Prival Bank S.A., through major shareholder ownership of its insurance operation.
AM Best placed Acerta’s ratings under review with negative implications on Dec. 19, 2019, due to concern at the time about the outcome of the prospective assessments of Acerta’s balance sheet strength and operating performance, driven by a lack of necessary information to complete these assessments and management´s lack of communication during the interactive rating process.
Acerta initiated operations in Panama City in 2010, and in 2017, the company acquired ADISA Panama. At year-end 2019, the company stood as Panama’s 10th-largest insurer, with a market share of more than 1.6%. Its main business segments are surety and motor, in terms of gross written premiums. Acerta operates through a network of agents, brokers and direct distribution channels.
The company’s capital and surplus has grown at a compound annual growth rate of 28.9% over the past five years, ultimately supported by profitability, as reflected by a return on equity of 7.7% in 2019. Acerta’s capitalization is reinforced by a reinsurance program with highly rated entities. Moreover, its capitalization and liquidity have provided the company with flexibility in order to cover historical deviations in claims.
Acerta’s continuous claims-containment adjustments within its motor and health insurance lines, coupled with synergies derived from the ADISA Panama acquisition, which continue to leverage its surety business, have led to improvements in underwriting performance, as reflected by combined ratios converging toward 100% at year-end 2019. AM Best expects Acerta to sustain this trend through year-end 2020, despite challenges arising from a very competitive and maturing market.
AM Best expects a thorough and improved implementation of Acerta’s ERM framework in order to mitigate emerging risks that may further erode the company’s balance sheet strength, operating performance or business profile.
Positive changes in the ratings or outlooks could take place if the company sustains improvements in its post-merger operating performance, coupled with a thorough implementation of its ERM framework while maintaining risk-adjusted capitalization at strongest levels. Negative rating actions could occur if the expected operating performance deviates considerably or weakens as a result of inconsistencies within its ERM profile, affecting the company’s risk-adjusted 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:
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- Evaluating Country Risk (Version Oct. 13, 2017)
- Rating Surety Companies (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 Guide to Best’s Credit Ratings.
Previous Rating Date: Dec. 19, 2019
Date Range of Financial Data Used: June 30 2014-Nov. 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.
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AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.