Fitch Rates Ohio National Seguros de Vida S.A.'s IFS 'BBB'

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned an international scale Insurer Financial Strength (IFS) rating of 'BBB' to Ohio National Seguros de Vida S.A. (Ohio). The Rating Outlook is Stable.

KEY RATING DRIVERS

The rating and outlook assigned to Ohio reflects its relatively narrow business niche compared to other insurers, adequate asset-liability management and the low investment risk, The leverage ratios and the operational performance have trended negatively, but Fitch considers this as temporary. While the operating environment in Chile and the conservative regulatory regime is favorable, the market is small with a high level of concentration.

Ohio's conservative asset/liability management policy is driven by Chilean regulation to hedge 100% of its liabilities up to 21 years. The company's risk adjusted reinvestment rate measured by the regulator (locally know as 'Test de Suficiencia de Activos') reached 0.44% as of March 2015, demonstrating low reinvestment risk and comparing favorably to local peers.

Asset risk is in line with similarly rated companies and compares favorably to other Chilean insurers. The weighted average rating of its investment portfolio is in the range of the 'A+(cl)'; composed mostly of domestic debt issuers with a small portion (4.9%) of investments abroad. Despite such characteristics, Fitch recognizes the limited ability of the company to move towards a higher average rating in order to achieve the tenor and diversification needs in a domestic capital market that is still less developed than other jurisdictions. Non-investment grade securities (below 'BBB') represented just 2.2% of total assets.

Gross Written Premium (GWP) growth as of March 2015 was mainly driven by the pension lines premiums rebound (21.7%), as well as by the increase in savings and credit life premiums (20% and 52.5% respectively). While this strong GWP increase did not result in a significant change in the company's market share (which remains small), it did improve diversification. The Chilean annuity and pension business is highly concentrated with the largest five companies comprising approximately 73% of the market. Ohio is a niche player in the 11th position.

Ohio's higher leverage ratios compare unfavorable with previous years, reaching 12.4x as of March 2015 from an average of 10.5x in the last four years. This was driven by dividend distributions to support the startup operations of the group in Peru as well as the capital strain t of GWP increase in 2015's first quarter. The company has deployed the total amount of its cumulative results since 2012. Continued high financial leverage could put pressure on the company's rating.

While claims costs remained stable during 2015's first quarter, the higher reserves required from premium growth and the slight deterioration in the efficiency ratios resulted in a deterioration of the operating ratio to 109.6% from 100.8% as of December 2014. Higher costs also influenced a lower net income, reaching net losses of CLP811 million and exhibit a poor profitability (ROAA of -0.5% and a ROAE of -6.7% annualized as of March 2015). Fitch expects these results to be temporary as GWP stabilizes.

RATING SENSITIVITIES

Stable Outlook: Fitch believes that the variations experienced by the company in terms of GWP, leverage and operating results are in line with the current rating. Nevertheless, sustained increases in operational leverage steadily to over 13 times (x), as well as substantial deterioration on the operational results could put downward pressure on the rating. Also, considerable changes in the investments allocation and credit risk could result in a downgrade. Conversely, strengthening in Ohio's market position in its relevant business segments, coupled with a more diversified GWP breakdown; a sustained improvement in the operating results that lead to capital growth, could positively affect the rating.

Additional information available at 'www.fitchratings.com' or 'www.fitchratings.cl'.

Applicable Criteria

Insurance Rating Methodology (pub. 04 Sep 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=756650

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=986849

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=986849

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150623006590/en/

Primary Analyst:
Franklin Santarelli, +1-212-908-0739
Managing Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst:
Carolina Alvarez, +56 2 2499 3321
Director
or
Committee Chairperson:
Julie A. Burke, CPA, CFA, +1-312-368-3158
Managing Director
or
Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
[email protected]

Source: Fitch Ratings

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Ivonescimab Monotherapy Demonstrates a Statistically Significant & Clinically Meaningful Benefit Compared to Pembrolizumab Monotherapy in PD-L1-Positive Advanced NSCLC in Akeso’s HARMONi-2 Study
• CLARITY Act Vote Lands September 15, 6 Best Crypto Presales Ahead of Crypto’s Big Washington Test
• Apeing Presale Surpasses $80,000 in Contributions as Stage 4 Launch Approaches