Market Overview

AM Best Affirms Credit Ratings of Mercantil Seguros y Reaseguros, S.A.


AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of "bbb" of Mercantil Seguros y Reaseguros, S.A. (Mercantil Seguros) (Panama). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Mercantil Seguros' balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

Mercantil Seguros' balance sheet strength is underpinned by its risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), which is at the strongest level. The ratings also reflect the company's well-structured reinsurance program, sound underwriting practices and conservative investment strategy. Partially offsetting these positive rating factors is Mercantil Seguros' relatively small size within Panama´s insurance industry.

Mercantil Seguros is a Panama-based (re)insurer established in 2013, with net premiums written composed of health (54%); miscellaneous (24%); and auto (19%), as of year-end 2019. The company, which is part of Mercantil Group's international companies, controlled by the ultimate parent, Mercantil Servicios Financieros Internacional, S.A., operates in Panama through a network of brokers and direct distribution channels. Mercantil Seguros also performs as a retrocessionaire for reinsurance business sourced in Venezuela, driven by reinsurance brokers.

Mercantil Seguros' risk-adjusted capitalization stands at the strongest level and is supportive of its current ratings. The company has increased capital at a 57% compound annual growth rate since it began operation, supported by positive bottom-line results, driven by a consistent inflow of underwriting and investment income, as well as a capital infusion. A well-balanced reinsurance program placed among counterparties of strong credit quality also reinforces the company's risk-adjusted capitalization.

In AM Best's view, Mercantil Seguros has shown sound underwriting practices, characterized by overall premium sufficiency levels. A combined ratio of 62% in 2019 was enabled through well-underwritten risks by group companies, thereby containing claims expenses. Additionally, consistent reinsurance profits, which offset acquisition costs, continue to support the company´s profitability, as evidenced by a return on equity and return on assets of 21.6% and 14.7%, respectively, in 2019.

AM Best expects the company's current geographic diversification to further improve through distribution channel synergies provided by the overall organization in the near to midterm, enabling Mercantil Seguros to expand its Panama-sourced business while diminishing dependence on its Venezuela-sourced business.

Positive factors that could result in positive rating action include improvements in geographic diversification in combination with sustained profitability, while maintaining risk-adjusted capitalization at the strongest level. Factors that could lead to negative rating action include protracted adverse underwriting performance that leads to a significant deterioration in its risk-adjusted capitalization, or political turmoil that affects Venezuela-sourced business.

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 media use of Best's Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and AM Best Rating Action Press Releases.

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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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