AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Compañía Internacional de Seguros, S.A. (CIS) (Panama City, Panama). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect CIS’ balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
CIS’ overall strength is underpinned by its risk-adjusted capitalization being at the strongest level, historically positive technical and bottom line results, its leading position in Panama’s insurance market, a strong reinsurance program, a seasoned management team, solid risk-management practices and increasing geographic diversification through its acquisition of Aseguradora del Istmo (ADISA) S.A.in Costa Rica. Partially offsetting these positive rating factors are the challenges CIS faces operating in a relatively limited and increasingly competitive insurance market.
CIS initiated operations in 1910 as a multiline insurer and ranks among the top companies in Panama in terms of premium market share. The company’s largest business lines include health, automobile, group and individual life, and miscellaneous business. CIS operates through a network of brokers and office branches in several cities throughout Panama.
CIS’ risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), has been maintained at the strongest level and is supportive of the ratings. Historically, the company has increased capital at a 9.5% compound annual growth rate as a result of positive bottom line results, driven by a consistent inflow of underwriting and investment income, which reflects the management team’s market knowledge and experience. AM Best expects the company’s capitalization to remain stable.
In 2018, CIS achieved an historical operating performance as reflected by a combined ratio of 89% and a return on premiums of 19.1%. These results were supported by the continued strong performance in its group life, health and auto businesses, which constitute 79% of net earned premium. In addition, CIS’ operating performance in personal accident and individual life business lines improved compared with the previous year. This was due to underwriting continuously supported by a strategic focus on specific niches within personal accident, and competitive pricing coupled with strict underwriting on a more mature individual life portfolio. Financial income continues to support CIS’ results while it maintains a sound risk profile; however, the company is not dependent on this revenue to achieve positive bottom line results. CIS continues to underperform in its fire business, mainly derived from strong competition in this business line, which is also generating losses in this industry segment. Although the company’s overall performance is strong, it constantly reviews its underwriting guidelines to improve the performance of business segments that are deviating from targets.
Despite the many positive characteristics of CIS, the ratings are still limited by the competitive environment present in its domestic market, as well as AM Best’s perception of the country risk in Panama, which has an AM Best country risk tier ranking of CRT-4, the second highest level in this scale. Positive factors that might improve the rating level or outlook include improvements in Panama’s risk profile in combination with a stable upward trend in CIS’ profitability, while maintaining supportive risk-adjusted capitalization. Factors that might lead to negative rating actions include protracted adverse underwriting and overall performance, a significant deterioration in its risk-adjusted capitalization or a downgrade of Panama’s country risk tier rating.
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