AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “a+” from “a” and affirmed the Financial Strength Rating of A (Excellent) of MAPFRE Panamá S.A. (MAPFRE Panamá) (Panama City, Panama). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect MAPFRE Panamá’s balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The Long-Term ICR upgrade reflects MAPFRE Panamá’s strategic importance to, and strategic alignment with, MAPFRE Internacional S.A., as well as the synergies and operating efficiencies derived from being a group member of MAPFRE S.A., the leading insurer in Spain.
The ratings reflect MAPFRE Panamá’s strong risk-adjusted capitalization and geographic importance to MAPFRE S.A. (MAPFRE Group) in Central America’s insurance market, as well as the integration of the MAPFRE Group’s practices and procedures into MAPFRE Panamá. The company maintained its market position in 2018, ranked as Panama’s third-largest insurer as of November 2018.
Partially offsetting these positive rating factors are the competitive dynamics that persist in the property/casualty (P/C) segment despite healthier growth rates.
MAPFRE Panamá is the third-largest insurer in Panama, ranking third in the life, auto and P/C segment. Panama’s insurance industry has shown signs of recovery as of November 2018, growing at a 5.8% rate, while MAPFRE grew slightly below that during this period, after growing 7.1% in 2017. Fluctuations in growth during 2017 and 2018 are explained by fluctuations in the surety business, with a higher volume in 2017 and lower in 2018.
MAPFRE Panamá’s solid capital base and good reserve position provide a solid base for financial flexibility and strong risk-adjusted capitalization levels. AM Best expects that the company’s ERM practices and procedures implemented from the MAPFRE Group continue to affect MAPFRE Panamá’s future performance positively.
MAPFRE Panamá’s combined ratio as of September 2018 has improved to 95.6% due to lower loss ratio, as underwriting has been adjusted to reflect its risk experience. Administrative and acquisition expenses have remained stable.
The strong competitive environment in Panama’s insurance market, especially in segments in which MAPFRE Panamá has leading positions, continues to generate challenging market conditions and increase risk appetites across the industry, presenting operating performance challenges in specific segments such as auto, individual life and health.
Positive rating actions taken on its ultimate parent, MAPFRE S.A., also could result in further positive rating actions for MAPFRE Panamá.
Negative rating actions could result from a significant reduction in MAPFRE Panamá’s risk-adjusted capitalization, either by constant deterioration in its underwriting performance or unexpected losses that render this measure to a level that no longer supports the current ratings, or if the company deviates significantly from the policies, practices and benefits assumed from its association with MAPFRE Group. Additionally, negative rating actions at its ultimate parent could lead to a downgrade of MAPFRE Panamá ratings.
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