AMSTERDAM–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Santa Lucía S.A. Compañía de Seguros y Reaseguros (Santalucía) (Spain). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Santalucía’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
Santalucía’s risk-adjusted capitalisation remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by good internal capital generation. The company’s balance sheet strength benefits from the protection against losses from most natural perils provided by the Spanish government’s national scheme (Consorcio de Compensacion de Seguros). Offsetting factors include the company’s riskier investment portfolio allocation although well diversified by asset-class, short-term financial liabilities and intangible assets (recognised in its balance sheet after acquiring Aviva’s Spanish life insurance business). AM Best expects the prospective capital position to benefit from stable earnings generation and a prudent dividend policy set in 2019, which includes a pay-out ratio of approximately 30% of post-tax earnings.
Santalucía’s operating performance benefits from a track record of solid technical earnings primarily stemming from the funeral expenses (decesos) line of business, in which it has a leading market position. The acquisition of Aviva’s Spanish life insurance business and investments in joint ventures that complement the decesos line of business have overall contributed positively to profitability. In 2019, Santalucía’s profit before tax stood at EUR 181.6 million, equivalent to a return on equity of 7.6%. Despite COVID-19-related claims in the decesos line, the company has continued to be profitable, reporting an overall net profit before tax of EUR 96 million in the first half of 2020.
Santalucía has an established profile as a provider of personal lines insurance in Spain and benefits from a long-standing brand and good reputation in the sector. It is now the eighth-largest insurance group in Spain by gross written premium, with its profile enhanced in recent years by a more diverse business mix and the broader reach of its network (mainly within Spain).
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