AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of Mercantil Reaseguradora Internacional, S.A. (Mercantil Re) (Panama). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Mercantil Re’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The stable outlooks reflect Mercantil Re’s capacity to maintain profitable metrics that strengthen and protect its capital base.

Mercantil Re is the wholly owned reinsurer of Mercantil Seguros y Reaseguros, S.A., part of the Mercantil group’s international companies controlled by the ultimate parent, Mercantil Servicios Financieros Internacional, S.A. (MSFI), which provides synergies and operating efficiencies. The company’s main purpose is supporting the group’s regional expansion throughout Latin America.

Mercantil Re’s balance sheet strength is underpinned by its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and is supported by a well-structured reinsurance program placed with highly rated retrocessionaries, as well as a conservative investment strategy aimed at providing liquidity and maintaining appropriate asset-liability management. Additionally, the company’s ERM framework is considered appropriate, as it benefits from the group’s guidelines and expertise.

Mercantil Re’s operating performance is assessed as adequate as it has remained profitable since 2020 through positive technical results and investment income. AM Best expects the company to maintain a profitable operating performance, based on its management’s track record in underwriting results, a diversified reinsurance structure and new business origination.

Factors that could lead to negative rating actions include the deterioration of either the group’s revenue or financial leverage at MSFI, hindering the group's ability to service its debts, and putting pressure on the financial strength of the insurance entities. Adverse underwriting performance that leads to a significant deterioration in Mercantil Re’ risk-adjusted capitalization also could drive negative rating actions. While unlikely in the medium term, a factor that could result in positive rating actions is improvement in the credit profile of the group, as a result of sustained profitability strengthening the group’s capital base.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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