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AM Best Revises Outlooks to Stable for Pacífico Compañía de Seguros y Reaseguros S.A.

AM Best has revised the outlooks to stable from positive and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Pacífico Compañía de Seguros y Reaseguros S.A. (PCS) (Lima, Perú).

The ratings reflect PCS’ 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 revision of the outlooks to stable reflects the turbulent economic environment in Perú created by the COVID-19 pandemic that places challenges ahead for business generation and COVID-19-related claims.

The ratings of PCS also reflect the company’s strong market share in Perú’s insurance market, as well as its comprehensive and well-diversified reinsurance program. Perú’s competitive landscape within the company’s key segments, including auto, health and life insurance, which have a limited number of insurers when compared with more-developed insurance markets, continue to limit the ratings amid the current economic crisis.

PCS is Perú’s second-largest insurer with a market share of 26.2%. As of October 2020, life insurance composed 55% of the company’s business portfolio, with non-life insurance making up the remaining 45%. Its ultimate parent is Peru’s largest financial holding company, Credicorp Ltd. [NYSE: BAP], which had USD 57 billion in assets as of December 2019.

After three years of consolidating its life and property/casualty (P/C) business into PCS, the company has maintained its risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). PCS benefits from risk mitigation achieved through diversification and a robust and comprehensive reinsurance program with highly rated reinsurers.

PCS has maintained adequate operating performance, with life-side investment products contributing to growth with a slight increase in benefits paid. Nevertheless, the results posted as of October 2020 reflect the impact of COVID-19 in the benefits paid tied to life insurance, particularly those related to pension plans, driving the change in outlooks to stable. AM Best expect some challenges ahead in business generation, but management capabilities seem capable to limit the impact of COVID-19 in the portfolio through adjustments in underwriting and aiming for positive technical results across all major segments.

Positive rating actions could take place if the company is able to maintain profitable underwriting performance in a steady manner amid the current business environment while maintaining its risk-adjusted capitalization at the strongest level, as measured by BCAR.

Negative rating actions could take place if the company’s underwriting results weaken to levels that could erode capital to levels that no longer support the net required capital for the risks the company has assumed.

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

  • Evaluating Country Risk (Version Oct. 13, 2017)
  • Understanding Universal BCAR (Version June 11, 2020)
  • Catastrophe Analysis in AM Best Ratings (Version Oct. 13, 2017)
  • Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
  • Scoring and Assessing Innovation (March 5, 2020)

View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, please refer to Guide to Best’s Credit Ratings.

  • Previous Rating Date: Dec 6, 2019.
  • Date Range of Financial Data Used: Dec. 31, 2014-Oct. 31, 2020

This press release relates to rating(s) that have been published on AM 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 AM Best’s Recent Rating Activity web page.

AM 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. AM Best does not audit the company’s financial records or statements, or otherwise independently verify the accuracy and reliability of the information; therefore, AM Best cannot attest as to the accuracy of the information provided.

AM Best’s credit ratings are independent and objective opinions, not statements of fact. AM 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. AM 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.

AM Best receives compensation for interactive rating services provided to organizations that it rates. AM Best may also receive compensation from rated entities for non-rating related services or products offered by AM Best. AM Best does not offer consulting or advisory services. For more information regarding AM Best’s rating process, including handling of confidential (non-public) information, independence, and avoidance of conflicts of interest, please read the AM Best Code of Conduct. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts:

Elí Sánchez
Associate Director
+52 55 1102 2720, ext. 122
eli.sanchez@ambest.com

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