AM Best


A.M. Best Assigns Credit Ratings to El Pacífico Peruano Suiza and El Pacífico Vida


CONTACTS:

Elí Sánchez
Senior Financial Analyst
+52 55 1102 2720, ext. 108
eli.sanchez@ambest.com

Alfonso Novelo
Director of Analytics
+52 55 1102 2720, ext. 107
alfonso.novelo@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

MEXICO CITY - SEPTEMBER 15, 2016 11:29 AM (EDT)
A.M. Best has assigned the Financial Strength Rating (FSR) of A- (Excellent) and a Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” to El Pacífico Peruano Suiza Compañía de Seguros y Reaseguros S.A. (PPS) (Lima, Perú). A.M. Best has also assigned the FSR of A- (Excellent) and a Long-Term ICR of “a-” to El Pacífico Vida Compañía de Seguros y Reaseguros S.A. (PV) (Lima, Perú). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings of PPS reflect its excellent market share in Peru’s property/casualty (P/C) market, as well as its strong risk-adjusted capitalization backed up by a comprehensive and well-diversified reinsurance program. Additionally, the ratings also recognize the improving trend in profitability driven by adjustments in its business strategy implemented by its seasoned management team. A.M. Best expects these positive rating factors to be mitigated by a gradual increase in the competitive landscape that is driven by soft global reinsurance market conditions, despite the strong levels of concentration in Peru’s reinsurance market and a limited number of participants when compared to more developed insurance markets.

PPS is an operating holding company underwriting P/C and life business through its subsidiary, PV. The consolidated business portfolio is comprised of 47% life and 53% P/C. The group stands as the second largest insurer in Peru, with a market share of 24.1% when combining its P/C (12.7%) and life (11.4%) companies. The ultimate parent for both companies is Peru’s largest financial holding company, Credicorp Ltd., which had USD 46.3 billion in assets as of December 2015.

During 2015, PPS was able to achieve premium sufficiency due to an improved operating expense ratio resulting from a stringent cost containment strategy and lower claims driven by underwriting adjustments as a result of management’s efforts to boost profitability. Additionally, the company’s stable flow of revenue from financial income helped it achieve its highest return on premium of the past five years at 23% and an excellent return on equity (ROE) of 23.9%.

The capital position of PPS is strong and has strengthened significantly on the positive results reported and constant capitalization of profits, which increased paid-in capital by 27% during 2015. This is reflected in strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which is also supported by a solid reinsurance program set with diverse highly rated participants.

Positive rating actions could take place if the company is able to maintain its premium sufficiency in the following years while materially improving its risk-adjusted capitalization. Negative rating actions could take place if the company’s underwriting results weaken or if capital erodes to levels that no longer support the net required capital for the risks the company faces.

On the other hand, PV, the second largest life insurance company in Peru, was able to improve its operating performance by achieving a higher than market growth rate driven by its pension business and improvements in operating expenses, which was further supported by an adequate and steady flow of financial products. These factors led to an improvement in bottom line results, with the ROE reaching 22.3%. Risk-adjusted capitalization for the company is very strong and backed up by a good reinsurance program.

Positive rating actions could take place if PV is able to maintain its profitable operating performance and further strengthen its capital base to levels similar to more highly rated companies. Negative rating actions could result if the company’s profitability deteriorates constantly from weakened underwriting or a more aggressive risk appetite that ultimately leads to a sharp reduction in risk-based capitalization.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. 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:


  • Catastrophe Analysis in A.M. Best Ratings (Version Nov. 3, 2011)

  • Equity Credit for Hybrid Securities (Version April 2, 2014)

  • Evaluating Non-Insurance Ultimate Parents (Version Feb. 24, 2012)

  • Evaluating Country Risk (Version May 2, 2012)

  • Insurance Holding Company and Debt Ratings (Version May 6, 2014)

  • Rating Members of Insurance Groups (Version Dec. 15, 2014)

  • Risk Management and the Rating Process for Insurance Companies (Version April 2, 2013)

  • Understanding Universal BCAR (Version April 28, 2016)

View a general description of the policies and procedures used to determine credit ratings. Also in accordance with Mexican regulations, the following is a link to required disclosures – A.M. Best America Latina Supplementary Disclosure. For information on the structure, voting and the committee process for determining the ratings and monitoring activities please refer to “Understanding Best’s Credit Ratings.”


  • Previous Rating Date: Not rated.

  • Date of Financial Data Used: June 30, 2016.

This press release relates to rating(s) that have been published on A.M. Best’s website. For additional rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.

A.M. Best does not validate or certify the information provided by the client in order to issue a credit rating.

While the information obtained from the material source(s) is believed to be reliable, its accuracy is not guaranteed. A.M. Best does not audit the company’s financial records or statements, or otherwise independently verify the accuracy and reliability of the information; therefore, A.M. Best cannot attest as to the accuracy of the information provided.

A.M. Best’s credit ratings are independent and objective opinions, not statements of fact. A.M. Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. A.M. Best’s credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions. View our entire notice for complete details.

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