Best’s News & Research Service - April 05, 2023 03:19 PM (EDT)
AM Best Affirms Credit Ratings of ASSA Compañía de Seguros S.A.
- April 05, 2023 03:19 PM (EDT)
Mexico City //BestWire// - AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” (Excellent) of ASSA Compañía de Seguros S.A. (ASSA) (Panama City, Panama). The outlook of the FSR is stable, while the outlook of the Long-Term ICR is positive. ASSA is a subsidiary of ASSA Compañía Tenedora, S.A. and is owned ultimately by Grupo ASSA, S.A., a financial service holding company publicly traded on the Panama Stock Exchange.
The Credit Ratings (ratings) reflect ASSA’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management.
The positive Long-Term ICR outlook is based on ASSA’s consistent operating performance, which AM Best expects to be sustained over the long term while growing its top line amid market developments and economic recovery.
The ratings also reflect ASSA’s balance sheet strength, which is underpinned by its risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), sustained good underwriting quality and profitability, solid capital management, an adequate reinsurance program and a supporting risk management framework for its risk profile. Additionally, the company has been able to maintain adequate financial leverage by repaying ahead of schedule most of the financing used in the 2018 transaction when ASSA acquired 100% of Assicurazioni Generali S.p.A.’s (Generali) Panama branch.
ASSA is a Panama-based insurer established in 1980 and ranks as the largest insurance company in Panama in terms of market share, based on premium. The company, which has a subsidiary in El Salvador, is diversified geographically and has a diversified portfolio of products and investments, with net premiums written mainly composed of auto, individual and group life and health insurance. ASSA operates through a network of brokers, agents and direct distribution channels.
The company´s capital base has grown consistently through reinvestment of earnings despite intangibles of Generali’s acquired business that continue to be amortized and (un)realized capital losses that hit in 2022 as a result of increased interest rates by federal reserves worldwide in an attempt to tame inflation. A well-diversified reinsurance program placed among a high-quality panel of reinsurers has reinforced the company’s growth strategy, and consequently, counterparty credit risk exposures have been minimized.
In 2021-2022, ASSA’s favorable operating performance continued, characterized by a combined ratio below 100%. Profitable underwriting results were sustained through a well-contained expense structure partially driven by the constitution of IBNR reserves in 2020, to cover unreported claims for individual and group life the following year, and increases in auto frequency and severity in 2022; as well as health claims consisting of elective surgeries suspended during the COVID-19 pandemic that developed in 2021. In 2022, bottom line results contracted from a spike in auto and health claims in conjunction with intensive investments in technology and digitalization aiming to sustain future growth and efficiencies. ASSA maintains a sound risk profile, and financial income continues to support its results; however, the company is not dependent on this revenue to achieve positive bottom-line results. ASSA constantly reviews its underwriting guidelines to improve the performance of business segments that are deviating from targets.
Positive rating actions could take place if ASSA is able to sustain improvements in its operating performance. Negative rating actions could occur if the company’s available capital is not able to support its risks, either from capital outflows or from a greater risk appetite. Additionally, negative rating actions could derive from a higher financial leverage or lower interest coverage metrics at the holding company.
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 (Version Oct. 13, 2017)
- Catastrophe Analysis in AM Best Ratings (Version March 10, 2023)
- Evaluating Country Risk (Version Oct. 13, 2017)
- Scoring and Assessing Innovation (Version Feb. 27, 2023)
- 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: March 24, 2022
- Date Range of Financial Data Used: Dec. 31, 2016-Dec. 31, 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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