OREANDA-NEWS. Fitch Ratings has affirmed Provincial de Reaseguros, C.A.'s (Pro Re) International Insurer Financial Strength (IFS) rating at 'CCC' and its National IFS rating at 'A-(ven)' with a Stable Outlook.

KEY RATING DRIVERS
The affirmation of the ratings reflects Pro Re's adequate technical performance with a combined ratio consistently below 100%, the robust growth in premiums collected, the new capital contributions and its adequate liquidity position.

However, Fitch expects Pro Re's performance will remain highly influenced by their operating environment, which could deteriorate due to macro-economic imbalances and political uncertainty in the country. In Fitch's opinion, given that 99.7% of its premium income comes from Venezuela and 12% of its assets are invested in sovereign debt, Pro Re's credit profile is vulnerable to deteriorations in the credit quality of the sovereign.

Pro Re reached 175% growth in premiums as of June 2015 (June 14: +61%). This is mainly due to the significant revaluation of insured property in the country, influenced by its high inflation. This affects the sustained growth of the Venezuelan insurance sectors' premiums (June 15: +99%), which remains Pro Re's main market. The company is a small competitor globally, although its participation in the local reinsurance sector is 36.3% of gross premiums.

However, Pro Re's capital levels are pressured by the fast growth in its operations and unrealized gains due to real estate revaluations (June 15: 65% vs. June 14: 37%). By excluding these gains, the net written premiums to adjusted assets ratio grew to 4.6x (June 14: 2.9x), above the average of its local peers of 4.3x. However, Fitch views positively Pro Re's new capital contributions (with a new contribution waiting for authorization from the regulator) and its adoption of a conservative dividend policy.

Fitch estimates that Pro Re's performance will remain favored by an adequate loss ratio that compares favorably to the market's average as of June 2015 (44.4%). It has resulted in a combined ratio that is persistently below 100% and below its local peers' average (June 15: 89.2%). However, Fitch will observe closely the impact of inflation levels in its operation, which led to a higher growth in its balance sheet (+136% in assets) than their profitability (+3%) as of June 2015.

Pro Re benefits from a favorable proportion of cash, bank deposits and government securities in its investment portfolio (54%) and within total assets (46%) as of June 2015. This allows the company to reflect adequate liquidity coverage ratios on reserves (175%) and total liabilities (104%). The coverage of their claims paid with cash and bank deposits remains above 100% (June 15: 122%), and higher than the average of their local peers of 96%.

RATING SENSITIVITIES
Key rating triggers that could lead to a downgrade include a decline in its operating performance, with a combined ratio above 100%; an operating leverage level above 3.0x, and a liquid assets coverage to net reserves below 1.0x.

Fitch believes there is limited potential for increasing Pro Re's Rating in the short term, given the current operating environment.

FULL LIST OF RATING ACTIONS

Fitch has taken the following rating actions:

Provincial de Reaseguros, C.A.
--International IFS rating at 'CCC';
--National IFS rating at 'A-(ven)'; Stable Outlook.