AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of "a+" of Chubb Perú S.A. Compañía de Seguros y Reaseguros (Chubb Perú) (Lima, Perú). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Chubb Perú's balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
Chubb Perú initiated operations in 1998 as Altas Cumbres; in 2007, it was acquired by ACE Group and branded ACE Seguros S.A., until 2016, when its name was changed to Chubb Seguros Perú S.A. following the acquisition of the Chubb Corporation by ACE Limited.
Chubb Perú has a diversified book of business, distributed through a mix of traditional and massive channels, such as large regional retailers and banks. Currently, its business portfolio is composed of 59% property/casualty, 22% accident and health and 18% life. As of October 2020, Chubb Perú is the 10th largest insurance operation in Peru, with a market share of 1.6%.
AM Best considers Chubb Perú's balance sheet strength as very strong, as the company has a defined risk appetite that limits exposures and protects its solid capital base through adequate investment, reinsurance and underwriting principles. Additionally, the company has a comprehensive reinsurance program with its affiliate, Chubb Tempest Reinsurance Ltd. In 2019, the company faced larger premium risk from its growth but continued to benefit from 2018's reclassification of excess unearned premium reserve to accumulated results, which in tandem with no dividend payments continued to reinforce the company's capital position.
The 2019 year-end results reflect the company's pinpointed growth strategy that has allowed it to post a lower combined ratio (70.7%) in comparison with the previous year, on the back of diminishing acquisition costs from its life offerings. Results through September 2020 reflect the lower frequency in claims and lower acquisition costs related to less activity in massive channels as the pandemic has limited growth in this segment. The company has maintained good collecting and no major affectation related to COVID-19 pandemic.
The company benefits from its integration into the Chubb group, gaining operational advantage through the same systems, procedures and ERM practices. The group has demonstrated its support to Chubb Perú by providing a comprehensive reinsurance program with its affiliate and actively overlooking its strategy.
Positive rating actions are not expected; however, AM Best's view on the company's operating performance could improve in the medium term if underwriting results result in a positive trend in operating performance while its capital base grows. Negative rating actions could occur if there is a sharp deterioration in operating performance or a significant weakening of its risk-adjusted capitalization. The ratings could be downgraded if AM Best determines that Chubb Peru's strategic importance to its group has diminished.
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