A.M. Best Removes from Under Review and Affirms Ratings of ASSA Compañía de Seguros S.A.; Affirms Ratings of Lion Reinsurance Company Limited and Reaseguradora America SPC Ltd.

A.M. Best has removed from under review with developing implications and affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit rating (ICR) of “a” of ASSA Compañía de Seguros S.A. (ASSA) (Panama City, Panama). The outlook assigned to each rating is stable.

A.M. Best also has affirmed the FSR of A- (Excellent) and the ICRs of “a-” of Lion Reinsurance Company Limited (Lion Re) (Bermuda) and Reaseguradora America SPC Ltd. (RAM Re) (Cayman Islands). The outlook for each of these ratings is stable. All companies are ultimately owned by Grupo ASSA, S.A. (Grupo ASSA), a financial services holding company publicly traded on the Panama Stock Exchange.

On Oct. 23 2015, ASSA’s ratings were placed under review with developing implications following the announcement that ASSA and ASSA Compañía Tenedora, S.A., entered a share-purchase agreement to fully acquire the Central America insurance operations of American International Group, Inc. (AIG) [NYSE:AIG], which includes El Salvador, Guatemala, Honduras and Panamá. At that time, the terms of the transaction were not disclosed and there were not sufficient elements to evaluate its impact on ASSA’s ratings.

Upon further review of the expected impact on ASSA’s capitalization and the structure and implications of the transaction, A.M. Best believes that ASSA’s risk-adjusted capitalization will still be supportive of its current ratings, although it will likely experience pressure as the transaction progresses, and will remain in tandem with the current and expected performance of the company. In addition, the acquisition of AIG’s operations will strengthen the group’s geographic footprint in Central America, with its entrance into the Guatemala and Honduras markets and an increased market share in Panama and El Salvador.

The affirmation of the ratings also acknowledges the diversification benefits and enhancement in regional presence the group will gain. Limiting the ratings are the challenges arising from the integration, in terms of systems, underwriting practices and Panamanian market dynamics, which that have become more aggressive with regard to terms, pricing and inorganic growth. Uncertainty on the timing of regulatory approvals in certain territories also is limiting the ratings.

ASSA is the main insurance operating company of ASSA Compañía Tenedora, S.A., based on its earnings contribution. As of December 2015, ASSA stood as the largest insurance company in Panama by premiums, with a market share of 16.9%, and could become one of the largest insurance operations in Central America in the medium term after consolidation of the AIG operations. Property/casualty products consisting of auto, property, aviation, marine, surety and other lines accounted for approximately 60% of written premiums, while personal lines consisting of life and health products, accounted for the remaining 40% of written premiums for the year ended Dec. 31, 2015.

Year-end results for 2015 diminished marginally in comparison with 2014 as a result of a higher combined ratio, driven by higher acquisition expenses and claims. However, the results were supported by good investment income, which allowed for positive bottom-line results and adequate profitability. As the integration of the AIG operations takes place in the upcoming years, A.M. Best expects the company to maintain good profitability levels and to achieve synergies related to administrative costs, reinsurance and business capabilities, which in the medium term could boost its operating profile.

The performance of Lion Re showed deterioration in 2015 due to larger claims and lower premium volume, which was tied to the performance of its affiliates. Nevertheless, the company continues to support the strategy of the group while producing positive bottom line results amid healthy prospects for growth. A.M. Best expects Lion Re to continue playing an important role in the strategy of the group as it consolidates its operations in new regions by providing reinsurance capacity while maintaining its good capital position.

RAM Re is registered as a Segregated Portfolio Company (SPC), currently integrated by two portfolios, and it is licensed as a Class B(i) insurer under the Cayman Islands’ insurance law. RAM Re ratings are based on the steady performance of its operations, as well as the nature of the portfolios managed. While both SPCs present high leverage, A.M. Best believes that the short tail nature and non-catastrophic characteristics of the risks insured, combined with their stable operating performance, allows such premium leverage. Capitalization is adequate for RAM Re’s current ratings, and while premium leverage has increased in both portfolios, it is still supported by the core's capital and by the commitment letter provided by the Group. Nevertheless, if another portfolio of the same dimensions begins to be managed, capital will not be enough to sustain current rating without further capital contributions.

A.M. Best does not anticipate any positive rating action for ASSA in the near term resulting from the integration of the AIG subsidiaries involved in the transaction. Aside from integration challenges and pressure on capitalization, the current rating action recognizes the upside of the transaction and its positive effects on the business and financial profiles of the company, which in the long term could lead to a positive rating action. On the other hand, negative rating action could occur if final capital outflows for the transactions surpass A.M. Best’s estimations to a point where the capital position of the company is affected materially, irrespective of operating performance. Any material changes to the financial profile also would be reviewed to assess any potential impact on ASSA’s ratings.

Drivers that could lead to an upgrade of the ratings and/or a positive outlook for Lion Re include stable underwriting performance and successful implementation of its strategy within the organization. Factors that could lead to negative rating action include a material loss of capital from either claims or investments, leading to a reduced level of capital that does not support its ratings.

Drivers that could lead to an upgrade of the ratings and/or positive outlook for RAM Re include a reduction in premium leverage and the continuation of its good underwriting results. Factors that could lead to negative rating action include increased premium leverage derived from increased underwriting, either by growth in volume of its current portfolios or by the inclusion of new ones without adequate capital that supports its current risk-adjusted capitalization, as measured by A.M. Best’s Capital Adequacy Ratio (BCAR).

Lion Re and RAM Re ratings are tied to A.M. Best’s internal assessment of Grupo ASSA; therefore, an unfavorable operating performance or material loss of capital could result in changes to these captives’ ratings.

A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

• Catastrophe Analysis in A.M. Best Ratings
• Evaluating Country Risk
• Insurance Holding Company and Debt Ratings
• Rating Members of Insurance Groups
• Rating Protected Cell Companies
• Risk Management and the Rating Process for Insurance Companies
• Understanding Universal BCAR

View a general description of the policies and procedures used to determine credit ratings. Also in accordance with Mexican regulations, the following is a link to required disclosures – A.M. Best America Latina Supplementary Disclosure.

• Previous Rating Date: Feb. 20, 2015
• Date of Financial Data Used: June 30, 2015

This press release relates to rating(s) that have been published on A.M. Best's website. For additional rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.

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