AM Best Revises Outlooks to Positive for Seguros Suramericana S.A.
AM Best has
revised the outlooks to positive from stable and affirmed the Financial
Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of
“a-” of Seguros Suramericana S.A. (Sura) (Panama).
These Credit
Ratings (ratings) reflect Sura’s balance sheet strength, which AM Best
categorizes as strongest, as well as its strong operating performance, neutral
business profile and appropriate enterprise risk management.
Sura’s balance
sheet strength is underpinned by its risk-adjusted capitalization being at the
strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported
by a well-structured reinsurance program, synergies provided by Grupo de
Inversiones Suramericana S.A. (Grupo Sura), a leading Colombia financial
services company in the Latin American insurance, asset management and banking
industries, and sound underwriting performance initially driven by its previous
integration with Seguros Banistmo, S.A. (Seguros Banistmo) in 2015. Offsetting
these positive rating factors is Panama’s highly competitive landscape, which
could pressure Sura’s operating performance.
As of year-end
2018, the company was the fourth-largest insurer in Panama, with a market share
of 9.72%; 71.3% of its business portfolio is composed non-life products, with
life products making up the remaining 28.7%. Sura’s main property/casualty
business segment is auto, which represents 36.8% of its gross written premiums.
Grupo Sura’s
initiative in 2018 to optimize shareholder value through the merger of
intermediate insurance holding companies, Suramericana S.A. and Inversura
Panamá Internacional S.A., drove a stock split transaction for its Aseguradora
Suiza Salvadoreña S.A. subsidiary. This further enhanced Sura’s risk-adjusted
capitalization, which was already at the strongest level.
Sura´s capital
base continues to be driven by its value-based management model and is
reinforced consistently through profitability and a prudent dividend policy
while meeting the group’s 2015 post-merger return on investment goals.
Additionally, the company’s balance sheet strength is supported by a
comprehensive reinsurance program, set with reinsurers that have excellent
security, and the implementation of an internal economic capital model.
Sound
underwriting practices, coupled with 2015 post-merger synergies that continue
to contain administrative costs, have driven Sura´s strong operating
performance as reflected in profitability metrics, characterized by an 81.8%
combined ratio at year-end 2018. In addition, the company’s business profile
continues to benefit in terms of added diversification and synergies, such as
the bancassurance distribution channel.
Positive
changes in the ratings or outlooks could occur if the company continues to
maintain its post-merger performance and profitability, leading to higher
levels of risk-adjusted capitalization. Negative rating actions could result if
the expected operating performance deviates considerably and weakens due to
Panama’s highly competitive environment, affecting the company’s risk-adjusted
capitalization or business profile.