AM Best downgrades Seguros SURA’s ratings with stable outlook

AM Best has downgraded Seguros Suramericana S.A. (Sura)’s Financial Strength Rating from A to A- and its Long-Term Issuer Credit Rating from “a” to “a-”, the outlook for these ratings has been revised from negative to stable.

These downgrades were prompted by changes in Sura’s underwriting performance, which have challenged the company’s profitability generation capabilities, leading to metrics that no longer align with the strong operating performance assessment.

Despite this, Sura’s balance sheet remains strong, supported by a well-structured reinsurance program and synergies from Grupo de Inversiones Suramericana S.A. (Grupo Sura).

However, the highly competitive market in Panama and historically high dividend payout ratios have offset some of these positive rating factors. As of June 2024, Sura is the fifth-largest insurer in Panama.

In 2018, Grupo Sura implemented a strategy to enhance shareholder value by merging its intermediate insurance holding companies, Suramericana S.A. and Inversura Panamá Internacional S.A., and executing a stock split for its subsidiary, Aseguradora Suiza Salvadoreña, S.A. This move further strengthened Sura’s already solid risk-adjusted capitalisation.

Sura’s capital base continues to be driven by its value-based management model, which aligns with the group’s post-merger return on investment goals. AM Best expects Sura to maintain strong capital management practices that support its current ratings.

The company’s balance sheet strength is further reinforced by a comprehensive reinsurance program with highly secure reinsurers and the use of an internal economic capital model.

AM Best analysts noted, “During 2023, most of Sura’s largest business lines presented a recovery in growth, after contracting during the previous period. Despite efforts to maintain all lines of business under premium sufficiency, the results reflect an opportunity for underwriting improvements, and puts pressure on the company’s profitability. As of June 2024, Sura’s operating performance metrics remain consistent with the adequate assessment, contributing to a net profit of USD 606,554.”

“Negative rating actions could occur if the company’s risk-adjusted capitalization deteriorates to a level no longer supportive of the current ratings as a result of capital base erosion. Positive rating actions could take place as a result of the successful evolution of the company’s business strategy, while presenting consistently strong operating performance metrics, with improving bottom-line results and profitability indicators to levels more in line with highly rated peers,” AM Best concluded.

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