Fitch Affirms Reaseguradora Patria's International and National IFS Rating

Fitch Ratings has affirmed Reaseguradora Patria S.A.'s (Patria) International Insurer Financial Strength (IFS) rating at 'A-' and its National IFS rating at 'AAA(mex)'. The Rating Outlook for both is Stable.

KEY RATING DRIVERS

Patria's ratings are based on its consistent and good capital adequacy, financial performance and earnings ratios. Its liquidity position is also adequate. In addition, Fitch positively views the company's qualitative factors such as its good track record of operation in the Latin American market, adequate corporate governance and risk management model, which has proven effective in monitoring and mitigating the company's exposures. Rating constraints include Patria's small size for a reinsurer that competes with global peers, a high expense ratio and an above average exposure to variable income investments.

As of September 2014, Patria's net premiums written (annualized) to equity ratio at 0.9x and net leverage ratio at 3.1x have remained consistent over the last five years. Both ratios have outperformed the median ratios for its rating category. This is driven by the stringent Mexican insurance regulation, conservative dividend policy and risk-based capital approach.

Patria has been also able to maintain low loss ratios over the years, aided by its adequate underwriting policies and pricing techniques, its limited participation in high loss frequency business lines (auto/health), good internal claims control and its conservative retrocession protection. Consequently, Patria's combined ratio, excluding catastrophic and contingency reserves, of 79.5% for the nine months ended Sep. 30, 2014 is consistent with its rating category and compares favorably with the 90.5% average for the 2009 to 2013 period. The company also generated a good return on equity ratio of 13% for the nine months ended Sep. 30, 2014.

Fitch also notes that Patria is not dependent on retrocession. It maintains a high retention level, 86% in average during the last five years, as a result of its geographically diversified business and its conservative underwriting and reserving policies. Furthermore, the company's catastrophic reserves cover 30.4x its retention under catastrophic retrocession reinsurance contract.

RATING SENSITIVITIES

Patria's ratings have limited upside potential in the short term given its small size relative to global reinsurers that drive the overall market.

Negative rating actions may be triggered by an increase in operating leverage ratio above 1.5x and recurrent high operating catastrophic and financial losses that undermine Patria's profitability and equity base. Also, negative movements on Mexico's sovereign rating may trigger a review of Patria's rating given its high exposure to government securities.

Additional information is available at 'www.fitchratings.com' and 'www.fitchratings.mx'

Applicable Criteria and Related Research:

-- 'Insurance Rating Methodology' (Sept. 4, 2014).

Applicable Criteria and Related Research:

Insurance Rating Methodology

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=978980

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.