AM Best Affirms Credit Ratings of Mercantil Reaseguradora Internacional, S.A.
MEXICO CITY–(BUSINESS WIRE)–#insurance—AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of Mercantil Reaseguradora Internacional, S.A. (Mercantil Re) (Panama). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Mercantil Re’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
Mercantil Re is the wholly owned startup reinsurer of Mercantil Seguros y Reaseguros, S.A., part of Mercantil group’s international companies controlled by the ultimate parent, Mercantil Servicios Financieros Internacional, S.A., which provides synergies and operating efficiencies. The company was established in 2019 in Panama with the main purpose of supporting group’s regional expansion throughout Latin America.
Mercantil Re’s balance sheet strength is underpinned by its strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and also is supported by a well-structured reinsurance program placed with highly rated retrocessionaries, and a conservative investment strategy aimed at providing liquidity and maintaining appropriate asset-liability management. Additionally, the company’s ERM framework is considered appropriate, as it benefits from the group’s guidelines and expertise.
In AM Best’s view, Mercantil Re’s operating performance reflects expenses and dependence upon investment income, given the company’s startup nature. However, breakeven was achieved in 2020, driven by management’s track record in underwriting practices, a diversified reinsurance structure and new business origination. AM Best expects the company to maintain a profitable operating performance above the 1.6% return on equity reflected in 2020.
Additionally, Mercantil Re’s limited business profile reflects the company’s execution risk driven by its expansion strategy and a strong competitive environment in its target geographic markets.
Positive factors that could improve Mercantil Re’s rating levels or outlooks include a sustained and successful improvement in business profile with good quality underwriting, which supports profitability and a strong balance sheet assessment. Factors that could lead to negative rating actions include adverse financial performance that leads to a significant deterioration in its risk-adjusted capitalization. Additionally, if AM Best determines that Mercantil Re’s strategic importance to its group has diminished, the ratings also could be downgraded.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all 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. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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 London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
Contacts
Salvador Smith
Senior Financial Analyst
+52 55 1102 2720, ext. 109
[email protected]
Alfonso Novelo
Senior Director, Analytics
+52 55 1102 2720, ext. 107
[email protected]
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
[email protected]
Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
[email protected]
