AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) 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 assesses 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), on both a standard and catastrophe-stressed basis. The company’s balance sheet strength assessment also reflects its adequate reserving approach and limited catastrophe exposure, as most natural perils in Spain are covered by the Consorcio de Compensación de Seguros, the compulsory government natural catastrophe scheme covering physical damage. Offsetting factors include the elevated risk profile of the company’s investment portfolio compared with peers, as well as its relatively high level of short-term financial liabilities and intangible assets (recognised in its balance sheet due to acquisitions in recent years). AM Best expects the company’s prospective capital position to benefit from organic capital generation, supported by a prudent dividend policy of approximately 30% of net profit results.

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. In 2022, Santalucía reported profit before tax of EUR 270.2 million (2021: EUR 183.9 million), which was positively impacted by reserve releases in decesos and life business, resulting from the uptick in interest rates. The company’s return-on-equity ratio stood at 10.3% (2021: 6.5%). The non-life combined ratio remained stable at 90.8% (2021: 91.0%). Santalucia’s life business reported growth of 34% in gross written premium (GWP), benefiting from a higher interest rate environment.

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. Santalucía’s business mix is relatively well-diversified, with a GWP split of 41% life and 59% non-life in 2022. However, production is concentrated in Spain, where Santalucia was the ninth-largest group by GWP in 2022. Geographic expansion is limited but expected to grow, according to the company’s strategic plan.

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