A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of MAPFRE Panamá S.A. (MAPFRE Panamá) (Panama City, Panama). The outlook of these Credit Ratings (ratings) remains stable.

The ratings reflect MAPFRE Panamá’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The ratings reflect MAPFRE Panamá’s strong risk-adjusted capitalization and geographic importance to MAPFRE S.A. (MAPFRE Group) in the Central American market, as well as the integration of the MAPFRE Group’s practices and procedures into MAPFRE Panamá. The company maintained its market position during 2016 and 2017, and ranked as Panama’s third largest insurer as of November 2017.

Partially offsetting these positive rating factors are the slow growth in Panama’s insurance industry, competitive dynamics that persist in the property/casualty segment and uncertainty over underwriting performance of the upcoming compulsory auto insurance in the country.

MAPFRE Panamá is the second largest auto insurer in Panama, and ranks second in the life segment and third in the property/casualty segment. Panama’s insurance industry has gradually decelerated since 2015, reaching an almost nil growth during 2016 and recovering at a 5% rate as of November 2017. MAPFRE Panamá took advantage of the slowing conditions during this period and grew its direct gross written premium 7.2% in 2016 and 11.8% as of September in 2017.

MAPFRE Panamá’s solid capital base and good reserve position provide a solid base for financial flexibility and strong risk-adjusted capitalization levels. A.M.Best expects that the ERM practices and procedures implemented from the MAPFRE Group continue to positively affect MAPFRE Panamá’s future performance.

MAPFRE Panamá’s combined ratio as of September 2017 showed a slight recovery. However, going into 2018, A.M. Best will need to assess underwriting performance under the stricter implementation of compulsory auto insurance in Panama and how the company approaches that segment.

The strong competitive environment in Panama’s insurance market, especially in segments in which MAPFRE Panamá has leading positions, continues to generate soft market conditions and increase risk appetites across the industry, presenting operating performance challenges in specific segments such as auto, individual life and health.

A.M. Best considers MAPFRE Panamá to be well-positioned at its current rating level. Positive rating actions could occur if the company is able to improve its technical income and achieve its growth targets, while maintaining its strong risk adjusted capitalization, as measured by Best’s Capital Adequacy model.

Negative rating actions could result from a significant reduction in MAPFRE Panamá’s risk-adjusted capitalization, either by constant deterioration in its underwriting performance or unexpected losses that render this measure to a level that no longer supports the current ratings, or if the company deviates significantly from the policies, practices and benefits assumed from its association with MAPFRE Group. Additionally, negative rating actions at its ultimate parent could lead to a downgrade of MAPFRE Panamá ratings.

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:

• Evaluating Country Risk (Oct. 13, 2017)
• Understanding Universal BCAR (Oct. 13, 2017)
• Catastrophe Analysis in A.M. Best Ratings (Oct. 13, 2017)

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 Understanding Best’s Credit Ratings.

• Previous Rating Date: Feb. 3, 2017.
• Date of Financial Data Used: Nov. 30, 2017.