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TMCNet:  Fitch Affirms Reaseguradora Patria's International and National IFS Ratings

[February 03, 2014]

Fitch Affirms Reaseguradora Patria's International and National IFS Ratings

NEW YORK --(Business Wire)--

Fitch Ratings has affirmed Reaseguradora Patria S.A.'s (Patria) International Insurer Financial Strength rating (IFS) at 'A-', Stable Outlook, and its National Scale IFS rating at 'AAA(mex)', Stable Outlook.

KEY RATING DRIVERS

Patria's ratings are supported by its leading position in target markets, strong capitalization, and consistently good operating performance. Fitch also views as positive the company's favorable qualitative factors such as corporate governance, management's expertise, and the company's broad product and market strategy.

Patria's average operating leverage of 1.0x over the last five years is conservative. This is a result of stringent Mexican insurance regulation, the company's conservative dividend policy, and risk-based capital approach. Patria's risk management model is advanced and has proven to be effective in monitoring and mitigating the company's risks

Patria's ratings also consider its sustained improvement in operating performance in the last five years, thanks to its more balanced market and business line profile. Fitch expects this further diversification to have a favorable impact on the company's risk profile. Through the first nine months of 2013, Patria's combined ratio was 84.8%, down from 88.7% in the previous year's period, benefitting from an improved net loss ratio.

The company's net financial income has been affected in the last year by the negative trend in the market value of investment portfolios, which in the particular case of Patria resulted in a loss of MXP7.7 million (USD0.6 million) as of September 2013, mainly driven by its position in government bonds (56% of total portfolio). The company's net income was a loss of MXP12.2 million (USD0.9 million) for the same period.

Fitch expects that Patria's underwriting profits in the fourth quarter will overcome the financial losses for the first nine months. Additionally, the company'smanagement has decided to increase its position in short-term securities as its current position in bonds reaches maturity, in order to lessen the impact of interest rate changes.


RATING SENSITIVITIES

Recurrent and higher losses from investments or high catastrophic losses that undermine Patria's profitability and its equity base may trigger a negative rating action for the company. Also, and even though not a likely scenario at the moment, negative movements on Mexico's sovereign rating may trigger a review of Patria's rating, given its high exposure to sovereign debt.

Patria's ratings have limited upside potential in the short term given its smaller relative size in the global reinsurance market.

Additional information is available at 'www.fitchratings.com'

Applicable Criteria and Related Research:

-- 'Insurance Rating Methodology - Global Master Criteria', November 13, 2013

Applicable Criteria and Related Research:

Insurance Rating Methodology -- Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723072

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=819235

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.


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