AM Best Assigns Credit Ratings to Seguros e Inversiones S.A.
AM Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of bbb+ (Good) to Seguros e Inversiones S.A. (SISA) (El Salvador).
AM Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb+” (Good) to Seguros e Inversiones S.A. (SISA) (El Salvador). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect SISA’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The ratings also reflect SISA’s strongest risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by consistent profitability, a diversified business profile and market leader position, as well as its appropriate reinsurance program. Its affiliation to Inversiones Financieras Grupo Imperia Cuscatlan S.A. (IFGIC), provides the company with synergies and operating efficiencies. Offsetting these positive rating factors are El Salvador’s current macro-economic conditions that may tamper SISA’s asset allocation strategy within non-investment grade fixed income.
SISA initiated operations in 1962. As of year-end 2020, the company stood as the market leader with 28% of gross premiums written covering domestic exposures. Fifty-eight percent of its business portfolio is composed of life products, 29% by property/casualty products, and the remaining 13% in health. SISA’s distribution channels are positioned with brokers, pension funds, bancassurance, and government mainly. In 2020, the merger and acquisition of Seguros SISA SV, S.A. was led by IFGIC in order to support the company’s growing domestic and regional expansion.
SISA’s risk-adjusted capitalization, as measured by BCAR, is supportive of its ratings, and as a result of the 2020 acquisition, its capital base was strengthened further. Additionally, SISA’s balance sheet is supported by a comprehensive reinsurance program set with reinsurers with excellent security. Nonetheless, AM Best expects the company’s very strong balance sheet assessment to remain pressured by the country’s macro fundamentals and its exposure to non-investment grade securities.
SISA has shown disciplined underwriting, consistently reporting overall premium sufficiency levels that compare positively with its competitors. In 2020, the company reflected a combined ratio of approximately 95.7%, marginally up from 90.6% in 2019 driven by the impacts of COVID-19 pandemic claims on its life business book, as well as increased reserves to overcome government delays and current global contingency. SISA’s consistent underwriting results have sustained overall profitability, as reflected in a return on equity of 10.8% by year-end 2020, and have contributed to expanding the company’s capital base.
Key factors that could lead to positive rating actions for SISA include sustained favorable trends in profitability while maintaining capital adequacy driven by good underwriting practices. Conversely, a sharp deterioration in operating performance or a significant weakening of its risk-adjusted capitalization driven by El Salvador´s macro-economic conditions could lead to negative rating actions.
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