Best’s News & Research Service - December 15, 2022 01:24 PM (EST)
AM Best Affirms Credit Ratings of Aseguradora Ancón, S.A.
- December 15, 2022 01:24 PM (EST)
Mexico City //BestWire// - AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Aseguradora Ancón, S.A. (Ancón) (Panama). The outlook of the Credit Ratings (ratings) is stable.
The ratings reflect Ancón’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Ancón’s balance sheet strength is underpinned by risk-adjusted capitalization at an assessed level of strongest, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by a well-structured reinsurance program, which covers the company’s different business lines, and sound underwriting practices. 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% as of September 2022. Property/casualty insurance products comprise 65% of its business portfolio, with the remaining 35% made up of life products, including accident and health. The company’s main segments are auto and health, representing 44% and 27%, respectively, of its gross premiums written. The company has two subsidiaries in Puerto Rico: Multinational Insurance Company (Multinational), a property/casualty insurer, and Multinational Life Insurance Company (Multinational Life), a life insurance company. Ancón’s risk-adjusted capitalization follows a positive trend, which has been driven by consistent profitability, the result of a prudent business strategy in terms of retention and growth, the aforementioned reinsurance program set with highly rated reinsurers and shareholder commitment, as reflected by the latest capital contributions from its holding company, Ancon Investment Corporation, in 2020 (USD 14 million) and 2021 (USD 2 million). In AM Best’s view, this parental support has provided Ancón with an optimized capital structure through a reduced level of financial leverage. In addition, risk-based capital faces reduced pressure from equity risk following the spinoff of subsidiaries investments in 2021. In the midterm, AM Best expects Ancón to maintain its balance sheet strength assessment of strongest.
Ancón’s underwriting performance has been undermined by deviations in claims in the health and auto lines of business, its most important segments. Despite its combined ratio surpassing the 100% threshold, Ancón posted positive bottom-line results in 2021, supported by investment income. The company has the ability to make the necessary pricing adjustments, as well as de-selecting of unprofitable business, in order to protect its bottom-line results going forward.
The stable outlooks reflect AM Best’s expectation that the company will maintain its balance sheet strength assessment, underpinned by prudent underwriting and consistent profitability.
Positive rating actions are not likely in the short term; however, sustained improvements in underwriting performance will be key for future revisions. Negative rating actions could take place if risk-adjusted capitalization deteriorates as a result of capital outflows or capital consuming losses. Negative rating actions could also be taken if the company experiences an unfavorable trend in underwriting performance due to an increased claims or a lack of effective price adjustments that destabilizes underwriting expenses.
The methodology used in determining these ratings is Best’s Credit Rating Methodology (Version Nov. 13, 2020), 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 AM Best Ratings (Version Oct. 13, 2017)
- Evaluating Country Risk (Version Oct. 13, 2017)
- Scoring and Assessing Innovation (Version March 5, 2020)
- Understanding Global BCAR (Version June 30, 2022)
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: Nov. 18, 2021
- Date Range of Financial Data Used: Dec. 31, 2016-Sept. 30, 2022
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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