Best’s News & Research Service - May 24, 2023 02:44 PM (EDT)
AM Best Affirms Credit Ratings of Aseguradora General, S.A.
- May 24, 2023 02:44 PM (EDT)
Mexico City //BestWire// - AM Best has affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” (Good) of Aseguradora General, S.A. (AGen) (Guatemala). The outlook of the FSR is stable while the Long-Term ICR outlook is positive.
The Credit Ratings (ratings) reflect AGen’s balance sheet strength, which AM Best assesses as strongest, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The positive outlook on the Long-Term ICR reflects AM Best’s expectation that the drag on AGen’s ratings will be eliminated as the financial leverage at the holding company continues to improve.
AGen was established in 1967 and is the fourth-largest insurer operating in Guatemala. As of year-end 2022, the company reported USD 91 million in direct premium, with a market share of 6.9%. The company underwrites a mixed portfolio of life and non-life business, with its retained premium distributed among major medical expenses (60%), auto (15%), property/casualty (P/C) (13%), group life (8%) and universal life (4%). The company’s business profile is assessed at neutral, supported by its importance within its domestic market, but limited by its geographic and product concentration.
The company’s majority shareholder is Luensi, S.A. (Luensi) (Guatemala), a pure holding company with investments in insurance, real estate and banking. Assicurazioni Generali S.p.A. previously owned AGen, but Luensi and a group of investors bought a 51% stake in May 2017.
As of December 2022, Guatemala’s USD 1.3 billion insurance market ranked as the third largest in Central America, with good growth prospects for the country’s economy given its macroeconomic stability.
AM Best considers AGen’s balance sheet strength to be at the strongest level. The company’s well-structured reinsurance program supports its capital base by properly limiting its exposure to catastrophe events. In previous rating assessments, Luensi’s debt obligations placed negative pressure on AGen’s ratings by limiting its financial flexibility due to substantial dividend payments; however, debt has shifted to more manageable levels with good interest coverages, partially mitigating AM Best’s concern. AM Best considers AGen’s ERM practices to be appropriate as its management capabilities are sufficient to meet its risk appetite.
AM Best views the company’s operating performance as marginal. The result posted for 2022 reflects the company’s improved underwriting in particular lines, while challenges still persist in its competitive insurance segments. AM Best also recognizes the positive development of AGen’s P/C lines of business; nevertheless, it has not been sufficient to generate a favorable trend in its underwriting results in consideration of its operating performance assessment. Net income has remained positive for the past five years, strongly supported by revenue coming from deferred premium and premium issuance rights predominantly from the company’s major medical expenses offerings.
Positive rating actions could take place if the holding company continues to keep its debt at manageable levels, relieving pressure on AGen’s cash flow. Negative rating actions could take place if the company’s business profile limits its operating performance in terms of quality of underwriting and bottom-line results.
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:
- Evaluating Country Risk (Version May 4, 2023)
- Understanding Global BCAR (Version June 30, 2022)
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- Scoring and Assessing Innovation (Version Feb. 27, 2023)
- Catastrophe Analysis in AM Best Ratings (Version March 10, 2023)
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: April 13, 2022
- Date Range of Financial Data Used: Dec. 31, 2016-Dec. 31, 2022
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