OREANDA-NEWS. Fitch Ratings has affirmed the Insurer Financial Strength (IFS) rating of El Pacifico Vida Compania de Seguros y Reaseguros (Pacifico Vida) at 'BBB'. The rating Outlook is Stable.

KEY RATING DRIVERS

The affirmation of Pacifico Vida's ratings reflects the company's stable operating profile, strong position in Peru's life insurance industry and diversified premium breakdown. The insurer's stable and competitive profitability is underpinned by an adequate underwriting profile and financial management, and a moderate credit risk profile of investments. This is partially offset by its geographic concentration in Peru and its increasing leverage ratio.

The continued growth in Pacifico Vida's equity base has not been enough to offset strong gross written premium growth, and has led to an increase in leverage in recent years. However, the adjusted liabilities-to-equity ratio still remains adequate (7.2x as of December 2015), and below Peru's life insurance segment average (9x).

Pacifico Vida's net income maintains a favorable trend, due to a stable operating performance, reaching PEN161millon as of Dec 15, up 8.5% from the previous year. The company maintains solid profitability ratios (ROAA 2.8% and ROAE 22.3% as of December 15), competitive both in the context of the local market, as well as at regional levels.

Pacifico Vida maintains a strong position in Peru's life insurance segment, achieving a gross written premiums market share of 22.9% as of December 15, while its market share on Peru's total insurance premiums reached 11.5%. Pacifico Vida is part of Pacifico Seguros, complementing the non-life insurance and health business of the group through its parent company, El Pacifico Peruano-Suiza Compania de Seguros y Reaseguros (PPS). On a consolidated basis PPS accounted for 23% of Peru's total insurance premium as of Dec15.

Pacifico Vida maintains a diversified and balanced premium breakdown, while facing an atomized portfolio risk. As of December 2015 its premium breakdown remains stable despite the return to mandatory survival and disability insurance for pensions (SISCO), while main business lines premiums remains in annuities (28%), individual life insurance (22%) and credit life insurance (22%). Pacifico Vida won one portion of SISCO?s public bidding, which explains the PEN116 million of total premium increase in 2015.

The company has adequate and efficient financial risk management. Pacifico Vida's assets are mainly concentrated in financial investments with an adequate credit profile. The company maintains solid asset and liability management (ALM), reflecting suitable duration and currency matching.

Similar to other life insurers, Pacifico Vida has a high and stable level of premium retention (97.3% as of Dec.2015). The company has a solid credit quality pool of reinsurers, which adequately limits its risk and event exposure, and allows it to maintain a maximum exposure equivalent of 0.34% of equity.

RATING SENSITIVITIES

Sustained stability in profitability, underpinned by increasing gross written premiums under strict underwriting parameters, showing stable technical performance, could lead to a ratings upgrade. Similarly, a more conservative investment portfolio and a reduction in leverage could benefit the rating.

A sustained net income slowdown, either due to low technical performance or higher financial income volatility, and/or tighter capital adequacy ratios, could lead to a downgrade of the ratings. Also, a potential weakening of its market position could pressure the assigned rating.