A.M. Best Affirms Rating for Compania Internacional de Seguros S.A.; Outlook is Stable

December 10, 2004

A.M. Best Co. has affirmed the financial strength rating of B++ (Very Good) of Compania Internacional de Seguros S.A. (IS) (Panama). The rating outlook is stable.

This rating reflects IS’ solid capitalization, disciplined underwriting and leadership position in local and regional markets. The rating also recognizes the company’s improved reserving practices and expansion initiatives. These positive rating factors stem from management’s commitment to effective control systems and focus on operating results.

In existence for 90 years, IS is the oldest insurer in Panama and one of the top three market leaders in the country. Utilizing its regional brand recognition and reputation, IS continues to seek opportunities in new markets through strategic alliances, which can provide additional insurance opportunities in the Central American region. Currently, IS has completed the process of upgrading its underwriting, financial, information and administrative systems, which should further enhance its competitive position.

These positive rating factors are partially offset by IS’ weakened operating performance in recent years. The company’s auto and health segments continue to be challenged by unfavorable market conditions, which have produced underwriting losses due to claim severity and high expense ratios in some lines of business. However, management has implemented corrective actions to improve the operating results of inadequately performing lines. These actions have provided some performance improvement, but have yet to be fully realized.

Furthermore, both the relatively small size and competitiveness of the Panamanian insurance market impose internal limits to the local growth prospects of IS. This challenges IS to maintain its business position and requires the continued enhancement of marketing strategies through the development of new and attractive products.

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