OREANDA-NEWS. Fitch Ratings has affirmed the local currency Insurer Financial Strength (IFS) rating of Rimac Seguros, Reaseguros y Subsidiarias (Rimac) at 'BBB'.

The Rating Outlook is Stable.

KEY RATING DRIVERS

The affirmation of Rimac's rating reflects the company's leading position in Peru's insurance market as well as its strong balance fundamentals, including a diversified premiums mix, solid performance, synergies among Breca group subsidiaries, including large distribution capabilities and strong brand name. Its ratings are limited by their narrow geographical scope compared to global players and its relatively higher leverage, which compares above the median of similarly-rated companies.

Rimac maintains a sound leadership within the Peruvian insurance market holding a solid market share of 32% of gross written premiums (GWP), 40% in non-life and health lines, and 24% in life segment. Fitch positively values Rimac's well-diversified GWP which strengthens its strong market position. The company is part of one of the larger economic group in Peru, Breca Group, being an active player in banks (BBVA Banco Continental), retail, mining, real estate, industrial fishing, healthcare (Rimac-EPS) and private hospitals among the principals. Rimac's group benefits from cross-selling potential, brand positioning, and business synergies which enhance Rimac's sound market position.

Rimac's leverage reached to 5.2 times (x) as of September 2014, in line within the range of its 2013 ratio though above previous years (2009-2012), where ratios were below 4x. The entity exhibits an effective equity of PEN941 million which excess the regulatory equity requirements in 1.04x.

Rimac's GWP has grown 12.8% compared to 2013, superior to the industry growth (11.5%). The premium increased was complemented by a higher underwriting efficiency (administrative and acquisition costs), resulting in a lower combined ratio of 103.6% compared with 110% of 2013. Though investment gains decreased compared to 2013, the resulting operating ratio improved to 90.1% as well as its company's main profitability ratios (ROAE 17.1% and ROAA 2.4%).

The company maintains an effective asset-liabilities management, due to liquidity ratios above 1x, and an investment portfolio concentrated in fixed-income securities presenting a low counterparty credit risk. The portfolio is concentrated mostly in 'BBB' (international scale ratings) and 'AAA' (national scale ratings) securities. The variable-income portfolio represents around 14% of the total investment portfolio and 65% of total equity, which in Fitch's opinion is adequate.

Reinsurance coverage remains adequate through quota-share and non-proportional scheme with a well-diversified reinsurer pool. Maximum Expected Loss is fully covered by its catastrophe capacity excess-loss program. The company's catastrophic protection remains adequate, limiting its exposure to 1.1% of its equity as of September 2014, highlighted the controlled counterparty risk.

RATING SENSITIVITIES
Factors that may lead to an upgrade include a sustained improvement of its main performance ratios, especially an operating ratio consistently below 85%, while leverage ratio falls below 4x.

Factors that may lead to a downgrade include a sustained leverage above 6x, higher credit-risk investment profile or a long period deterioration of main underwriting performance, mainly in the non-life segment.