OREANDA-NEWS. Fitch Ratings has affirmed Reaseguradora Patria S. A.'s (Patria) International Insurer Financial Strength (IFS) rating at 'A-'. The Rating Outlook is Stable.

The rating actions on Patria follow the downgrade of Mexico's Local Currency Long-Term IDRs to 'BBB+' from 'A-'/Stable Outlook (for further information, see 'Fitch: Global Sovereign Rating Changes From Criteria Update', dated July 25, 2016, at www. fitchratings. com').

KEY RATING DRIVERS

Rating action reflects Patria's strong operating performance, geographical diversification and investment allocation. Patria has historically outperformed its peers in terms of capitalization levels and technical performance.

Patria's geographical premium diversification is a competitive advantage. From June 2015 to June 2016, Patria's operation in Mexico represented 32% of earned premiums and the remaining 68% came from 70 countries. Despite local regulatory restrictions on investments outside Mexico, the investment portfolio is diversified and of high quality. As of December 2015, Mexican sovereign debt represented 59% of Patria's investment portfolio which equated to over 1.8x of Patria's equity (June 2016: 57% and 2.1x respectively).

To mitigate Transfer and Convertibility (T&C) risk, 53% of Patria's premiums come from jurisdictions rated investment grade, 37% below investment grade and 10% not rated by Fitch. Also, company's book value invested portfolio in bonds is diversified by currency, 65% in dollars, 7% in euro, 2% in Mexican peso and 1% in UDI (value unit based on price change).

RATING SENSITIVITIES

Patria's ratings have limited upside potential in the short term given its relative small size in a market where large global players manage the largest share of the reinsurance market. Operating leverage ratio above 1.5x and recurrent high operating catastrophic and financial losses that undermine Patria's profitability and equity base may trigger a negative rating action.

Negative movements on Mexico's country ceiling and sovereign rating may trigger a review of Patria's rating.