AM Best Affirms Credit Ratings of Seguros Universales, S.A.
AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of "bbb-" (Good) of Seguros Universales, S.A. (Universales) (Guatemala). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Universales' balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The stable outlooks reflect AM Best's expectation that the company will be able to manage its capital base in support of its balance sheet strength assessment.
Universales, which was established in 1962, is the fourth-largest insurer in Guatemala, with a market share of 8.8%. The company's portfolio, as of August 2023, is composed mainly of non-life products (78%), with the remainder (22%) focused on the life insurance market. The company holds very competitive positions in Guatemala's property/casualty (P/C) and accident and health segments, ranking 4th and 5th, respectively. The company is owned privately by a group of 10 shareholders, none with a stake larger than 29%.
AM Best views Universales' business profile as neutral, based on the company's market position and its ability to develop niche markets through commercial alliances, distribution channels and by developing new product offerings. The company's management capabilities have allowed it to enter key business lines in Guatemala, reflecting in double-digit growth since 2021 and so far in 2023.
AM Best assesses Universales' balance sheet strength as very strong, due to the availability and quality of the capital, reinsurance protection and its conservative risk profile. The company's consistently profitable results are reflected in its growing capital base with a conservative risk profile and well-structured dividend payments. Universales has a reinsurance program based on a mixture of treaty and facultative programs with highly rated reinsurers, which historically have been effective in protecting its balance sheet.
AM Best views Universales' operating performance as marginal due to its dependency on other technical income and investment results to generate positive bottom-line results, as its combined ratio has been consistently above 100. During 2023, the company has continued to adjust its offerings in terms of price and coverages, which helped it to maintain a loss ratio below 50% through August 2023; however, administrative expenses and acquisition costs continue to limit its performance. AM Best will continue to monitor the performance as its market experience develops.
Negative rating actions could take place if the company's capital base deteriorates as a consequence of undertaking higher risks or underperforming business without prudent capital management. Positive rating actions could take place if operating performance improves in a consistent and sustained way in the medium term.
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