[January 04, 2013]

A.M. Best Affirms Ratings of ASSA Compania de Seguros, S.A. and Lion Reinsurance Company Limited

A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit rating (ICR) of "a" of ASSA Compania de Seguros, S.A. (ASSA) (Panama City, Panama).

A.M. Best also has affirmed the FSR of A- (Excellent) and ICR of "a-" of Lion Reinsurance Company Limited (Lion Re) (Bermuda). The outlook for all ratings is stable.

The ratings reflect ASSA's continued excellent operating results, favorable capitalization and strong business profile. ASSA maintains a well-diversified book of business that includes both property/casualty and life/health products. ASSA is ultimately owned by Grupo ASSA, S.A. (Grupo ASSA), a publicly traded financial services holding company on the Panama stock exchange.

ASSA has shown disciplined underwriting in a highly competitive market, while its risk-based capitalization remains fully supportive of its current ratings and outlook. ASSA's underwriting profitability is complemented by consistent levels of investment income, which has enabled it to steadily appreciate surplus while still providing Grupo ASSA with dividend payments. ASSA also benefits from established risk management systems and strong reinsurance programs across most lines of business.

Partially offsetting these positive rating factors is ASSA's risk concentration in a geographically limited insurance market along with operating in a country that A.M. Best considers to have an elevated level of country risk compared to ASSA's ratings. Additionally, the Panamanian insurance market is becoming increasingly competitive as local and large outside insurers continue to compete for market share.

Positive rating actions could occur if ASSA maintains its consistently strong underwriting performance and long-term profitability in conjunction with an ugrading of Panama's country risk tier. Negative rating triggers could include a significant decline in ASSA's risk-based capitalization, sustained adverse operating performance or a downgrading of Panama's country risk tier.

The ratings of Lion Re acknowledge its strong initial capitalization, conservative operating strategy and the explicit parental support. The ratings also consider Lion Re's strategic role as a captive reinsurer of ASSA Tenedora, S.A.

Also inuring to Lion Re's ratings is its sound business plan, upon which the profitability and liquidity measures of these ratings are based. The ratings are supported by an amount of capital that meets A.M. Best's requirements for newly formed companies as measured by Best's Capital Adequacy Ratio (BCAR). Lion Re operates as a Bermuda-based reinsurer focused on writing a combination of property, casualty, health and group life business from affiliated insurers.

These positive rating factors are partially offset by execution risk due to the unproven start-up nature of the company.

Drivers that could lead to a positive outlook or rating upgrades for Lion Re are a stable underwriting performance, as well as reduced overall net exposure over the next few years and successful implementation of its business plan. Factors that could lead to a negative outlook or rating downgrades are a material loss of capital from either claims or investments, a reduced level of capital that does not support the ratings or an increase in net retention. Lion Re's 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 the captive's 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. Key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding Universal BCAR"; "Catastrophe Analysis in A.M. Best Ratings"; "Rating Members of Insurance Groups"; and "Assessing Country Risk." Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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