Best’s News & Research Service - January 26, 2024 02:00 PM (EST)
AM Best Revises Outlook to Negative, Affirms Credit Ratings of Aseguradora Ancón, S.A.
- January 26, 2024 02:00 PM (EST)
Mexico City //BestWire// - AM Best has revised the outlooks to negative from stable and 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).
These Credit Ratings (ratings) reflect Ancon’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.
The negative outlooks reflect the challenges the company faces in order to return to profitable metrics in the short and medium term. An atypical year in claims for Ancón’s health and fire segments, coupled with the slow growth in Panama’s insurance market in recent years have pressured results, potentially resulting in further losses if not successfully counteracted.
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), and supported by a well-structured reinsurance program, which covers the company’s different business lines. Furthermore, Ancon’s holding company, Ancon Investment Corporation, has demonstrated continued parental support in the form of capital contributions, the latest taking place in September and November of 2023, totaling USD 6 million.
Ancón is the seventh-largest insurer in Panama, with a market share of 3% as of September 2023. 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 40% and 24%, respectively, of its gross premiums written.
Ancón’s risk-adjusted capitalization has shown stability, as a result of its prudent business strategy in terms of retention and growth, a reinsurance program set with highly rated reinsurers and the aforementioned shareholder commitment. 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. The company is making the necessary pricing adjustments, as well as de-selecting unprofitable business, in order to avoid a potential negative trend in its bottom-line results going forward.
Negative rating actions could be taken if the company continues to experience an unfavorable trend in underwriting performance driven by administrative expenses. Positive rating actions could take place if the company is able to revert the current trend in operating results.
The methodology used in determining these ratings is Best’s Credit Rating Methodology (Version Jan. 18, 2024), 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 & Insurance Holding Company Analysis (Jan. 18, 2024)
- Catastrophe Analysis in AM Best Ratings (Version March 10, 2023)
- Evaluating Country Risk (Version May 4, 2023)
- Scoring and Assessing Innovation (Version Feb. 27, 2023)
- Understanding Global BCAR (Version July 6, 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, relevant sources of information and the frequency for updating ratings, please refer to Guide to Best’s Credit Ratings.
- Previous Rating Date: Dec. 15, 2022
- Initial Rating Date: June 21, 2012
- Date Range of Financial Data Used: Dec. 31, 2018-Nov. 30, 2023
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