MEXICO CITY--(BUSINESS WIRE)--AM Best has upgraded the Financial Strength Rating to A++ (Superior) from A+ (Superior) and the Long-Term Issuer Credit Rating to “aa+” (Superior) from “aa-” (Superior) of Chubb Seguros Panama S.A. (Chubb Panama) (Panama City, Panama). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Chubb Panama’s strategic importance as a subsidiary of the Chubb U.S. Group of Insurance Companies (Chubb U.S Group), which on a consolidated basis has a balance sheet strength that AM Best assesses at the strongest level, as well as its very strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
The upgrade of Chubb Panama’s ratings reflects the company’s integration and support from its group through its holding company, Chubb U.S Group, which provides synergies and operating efficiencies to the Panama subsidiary.
The stable outlooks reflect AM Best's expectation that Chubb U.S Group will maintain its strongest balance sheet strength assessment, supported by risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), while continuing to demonstrate very strong operating results driven by the group's consistently solid underwriting performance. The stable outlooks further reflect AM Best's expectation that the ultimate parent, Chubb Limited, will continue to have a neutral impact on the ratings of the group’s members.
The ratings reflect Chubb Panama’s sound underwriting practices, which support its consistent operating performance, diversified business portfolio and solid reinsurance program placed with Chubb Tempest Reinsurance Ltd., as well as the company’s affiliation to its ultimate parent, Chubb Limited, one of the world’s largest insurance groups. This affiliation provides Chubb Panama with synergies and operating efficiencies. Offsetting these positive rating factors are Chubb Panama’s modest but growing market share within Panama’s insurance industry relative to the lines of business it writes, and the strong competitive environment in Panama’s insurance sector. However, the company partially mitigates this competitive aspect through its diversified business portfolio that is spread across other markets in Central America.
Chubb Panama initiated operations in 2008 as ACE Seguros S.A., and continued with that brand name until 2016 when its name was changed to Chubb Seguros Panama S.A. The company writes mainly non-life and reinsurance business, covering exposures throughout Panama and Central America. In 2021, property stood as the company’s main business line, generating 28.8% of its net written premium. Chubb Panama’s main distribution channels are positioned with brokers and cedent companies. Chubb Panama has shown disciplined underwriting in a highly competitive market, consistently reporting overall premium sufficiency levels that compare positively with its competitors. In 2021, Chubb Panama achieved a combined ratio of approximately 92%, up from 78.7% in 2020, and driven by the increase in claims in its fire and transport business lines, as well as an increase in its administrative expenses.
The Panama subsidiary’s strong underwriting results have sustained sound overall profitability, as reflected in a return-on-equity ratio of 5.0%, and contributed to expanding the company’s capital base at a 10.2% compound annual growth rate in 2021. AM Best expects Chubb Panama’s risk-based capitalization to remain supported by the group´s conservative capital management guidelines.
Moreover, the company benefits from being integrated into the group, gaining operational leverage through the same systems, procedures and ERM practices. The group historically has demonstrated its support to Chubb Panama through capital injections to fund growth opportunities. A change in AM Best’s perception regarding the strategic importance of Chubb Panama to the group could impact Chubb Panama’s ratings.
The ratings could be negatively affected by the following factors: deterioration in the group's risk-adjusted capitalization to a level that no longer supports the current ratings; sustained deterioration in underwriting or operating performance; a material weakening of Chubb Ltd.'s overall credit profile.
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