MEXICO CITY–(BUSINESS WIRE)–AM Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” (Excellent) to Seguros Reservas S.A. (Seguros Reservas) (Santo Domingo, Dominican Republic). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Seguros Reservas’ balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
Seguros Reservas’ balance sheet strength is underpinned by its risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The ratings also reflect its strong operating performance, driven by consistent profitability, coming from a diversified book of business and contained underwriting leverage, and the company’s affiliation with Banco de Reservas de la República Dominicana, Banco de Servicios Múltiples (Banco de Reservas), the largest bank in the Dominican Republic.
Partially offsetting these positive rating factors is the strong competition in the Dominican Republic’s insurance market, which AM Best believes could pressure the company’s profitability and market share, the company’s high dividend payout ratios and an ERM framework that has room for further sophistication.
Seguros Reservas underwrites life and non-life business, and is one of the leading insurers in the Dominican Republic, currently holding a 14.2% market share as of June 2022.
In 2021, fire insurance continued to represent the company’s main line of business, accounting for 40% of gross premiums, followed by auto (25.9%) and life (13.6%), with the remainder (20.5%) in other lines of business. The company has shown disciplined underwriting in a highly competitive market, consistently reporting profitability that compares favorably with its closest competitors. In addition, investment income has remained stable, further contributing to positive bottom-line results.
Seguros Reservas’ risk-adjusted capitalization stands at strongest level, as measured by BCAR. Adjusted capital has grown at a compound annual growth rate of 20.7% during the past six years, and AM Best expects this trend to continue supported by sound underwriting, prudent dividend and investment policies, as well as an effective cost containment strategy. Furthermore, Seguros Reservas continues to benefit from operating efficiencies afforded by Banco de Reservas.
Positive rating actions are not expected in the medium term. Negative rating actions could occur if the company’s risk-adjusted capitalization deteriorates to a level no longer supportive of the current ratings. Negative rating actions could also take place as a result of a sustained deterioration of the company’s operating performance metrics to levels no longer supportive of the strong assessment.
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Olga Rubo, FRM
Senior Financial Analyst
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