20 June 2023Analysis

AM Best affirms Lion Re ratings

AM Best has affirmed the financial strength rating of A and long-term issuer credit rating of “a” of Lion Reinsurance Company. The outlook of these credit ratings is stable.

Lion Re is a subsidiary of ASSA Compañía Tenedora and is owned ultimately by Grupo ASSA, a financial services holding company publicly traded on the Panama Stock Exchange.

AM Best said that the ratings reflect Lion Re´s balance sheet strength, which it assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

Lion Re is a Bermuda-based reinsurer assuming risks from ASSA Tenedora and affiliates for property, liability, marine, group life (short term), health and miscellaneous businesses. AM Best recognises the strategic role that Lion Re aims to achieve in the group’s overall regional strategy; however, Lion Re’s business profile is considered limited given its accessibility to markets when compared with other commercial reinsurers.

Lion Re´s capital base is supportive of risk-adjusted capitalisation being assessed at the strongest level, as measured by Best’s capital adequacy ratio, while it continues to perform an important role in ASSA Tenedora’s strategy as it consolidates operations in the Central American region, by providing reinsurance capacity.

Lion Re’s adequate operating performance results from its affiliated insurance companies in the Central American region, as well as its affiliation to Grupo ASSA, which provides synergies, operating efficiencies and guarantee support. The company consistently reviews its underwriting guidelines to improve the performance of business segments that are deviating from targets. Investment income, based on a conservative strategy, continues to support Lion Re’s results; however, the company is not dependent on this revenue to achieve positive bottom-line results.

AM Best does not foresee any positive rating actions; however, Lion Re’s strategic role within the group as well as the guaranteed support of its parent, remains paramount for the current ratings, along with the maintaining of its strongest level of risk-adjusted capitalisation. Factors that could lead to negative rating actions include a material loss of capital that reduces risk-adjusted capitalisation to a level that does not support the ratings, or if the strategic importance of Lion Re to the group diminishes.