AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Seguros Suramericana S.A. (Sura) (Panama).
These Credit Ratings (ratings) reflect Sura’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The outlook revisions reflect AM Best’s expectation that the company will not be able to reverse the negative trend in operating performance over the next rating cycle. This could lead to a decline in the overall assessment of Sura’s operating performance in the near term.
Sura’s balance sheet strength is supported by a well-structured reinsurance program and synergies provided by Grupo de Inversiones Suramericana S.A. (Grupo Sura), a leading Colombia-based financial services company in Latin America’s insurance, asset management and banking industries, as well as sound underwriting performance, initially driven by its 2015 integration with Seguros Banistmo, S.A. Offsetting these positive rating factors are Panama’s highly competitive landscape, which puts additional pressure on Sura’s operating performance, and the company’s historically high dividend payout ratios.
As of June 2023, the company was the fifth-largest insurer in Panama, with a market share of 7.5%; 68% of its business portfolio is composed of non-life products, with life products making up the remaining 32%. Sura’s main property/casualty business segment is auto, which represents 34% of its gross written premium.
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 subsidiary, Aseguradora Suiza Salvadoreña, S.A. This further enhanced Sura’s risk-adjusted capitalization, which was already at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Sura’s capital base continues to be driven by its value-based management model, while meeting the group’s post-merger return on investment goals. AM Best expects Sura to follow consistent capital management guidelines supportive of its ratings. Additionally, the company’s balance sheet strength is supported by a comprehensive reinsurance program, set with reinsurers that have excellent security, as well as the implementation of an internal economic capital model.
During 2022, most of the company’s lines of business sustained an overall contraction of 4.6%, reflecting the challenges of the current economic environment. The level of claims rose mainly due to the impact of Covid-19 cases, as well as increases in parts and labor costs affecting the auto segment. The company expects a decrease in its loss ratio for year-end 2023. Despite efforts to maintain all lines of business under premiums sufficiency, the results reflect an opportunity for underwriting improvements, and put pressure on the company’s profitability. As of June 2023, Sura’s operating performance metrics still face a downturn, contributing to a net loss of USD 1.8 million.
Negative rating actions could take place as a result of a continuing deterioration in the company's operating performance metrics to levels no longer supportive of the strong assessment. Negative rating actions could also occur if the company's risk-adjusted capitalization deteriorates to a level no longer supportive of the current ratings as a result of capital base erosion. Positive rating actions could take place if the company is able to reverse the current trend in its operating performance metrics.
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Olga Rubo, FRM
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