A.M. Best Affirms Credit Ratings of Aseguradora Ancón, S.A.. The outlook of these Credit Ratings (ratings) is stable.
Ancón maintains adequate risk-adjusted capitalization at an assessed level of adequate, supported by a well-structured reinsurance program that covers the company’s different business lines, as well as a stable loss ratio. Offsetting these positive rating factors is the slow dynamism of Panama’s insurance market in recent years and the strong competition Ancón faces in its main segments.
Ancón is the sixth-largest insurer in Panama with a market share of 3.6% as of June 2018. Property/casualty products compose 68% of its business portfolio, with the remaining 32% made up of life products (including accident and health). The company’s main segments are auto and health, representing 37% and 21%, respectively, of its gross written premiums. The company holds two subsidiaries in Puerto Rico: Multinational Insurance Company (Multinational), a property/casualty insurer, and Multinational Life Insurance Company (Multinational Life), a life insurance company.
In 2017, the company’s combined ratio deteriorated, derived from lower commissions from ceded premiums; however, Ancón maintained a stable loss ratio and continued to benefit from reserve releases that started in 2014.
The prudent business strategy in terms of retention and growth has allowed Ancón to maintain stable levels of required capital while producing positive results and growth of its reported surplus. A comprehensive reinsurance program set with highly rated reinsurers further supports Ancón’s risk adjusted capital.
Panama’s insurance market so far in 2018 has shown improvements over the past two years, and as of June 2018, it has grown 3.8% on a year-to-year basis in real terms. Opportunities are still limited given the lack of dynamism in certain sectors (e.g., new cars sales and new infrastructure projects); however, A.M. Best expects Ancón to maintain a steady underwriting performance based on its current strategy, as evidenced by its loss ratio of 43.3% as of June 2018, an improvement from the loss ratio of 57.8% recorded at year-end 2017.
Positive movement in Ancón’s ratings or outlooks could take place if the company continues to implement its strategy in a profitable manner with continued support from its strong reinsurance program and stable levels of risk-adjusted capitalization. Negative rating actions could occur if the company’s operating results show a negative trend of sustained losses that affect its capitalization or business profile.
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