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 maintain its risk-adjusted capitalization while new business performance develops.
Universales, which was established in 1962, is the sixth-largest insurer in Guatemala, with a market share of 7.74%. The company’s portfolio, as of August 2022, is composed mainly of non-life products (75%), with the remainder (25%) focused on the life insurance market. The company holds very competitive positions in the property/casualty (P/C) and accident and health segments, ranking 5th and 6th, respectively. The company is owned privately by a group of 10 shareholders, none with a stake larger than 23%.
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 offerings. The company’s management capabilities have allowed it to enter key business in Guatemala, reflecting in a 30.9% growth for 2021. In addition, the company’s digitalization and ERM efforts are allowing the company to navigate the ongoing economic cycle successfully.
AM Best assesses Universales’ balance sheet strength as very strong, due to the availability and quality of the capital, reinsurance protection and conservative risk profile. The company’s consistent profitable results are reflected in a 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. In the past three years, the company has adjusted its offerings in terms of price and coverages, which helped it to improve its loss ratio most recently 48% in August 2022; 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 higher risks undertakings 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.