OREANDA-NEWS. Fitch Ratings has affirmed the 'BBB' international scale Insurer Financial Strength (IFS) rating of Ohio National Seguros de Vida S.A. (Ohio). The Rating Outlook is Stable.

KEY RATING DRIVERS

The affirmation is based on the stability of the company's key credit metrics. Ohio's rating reflects its small size and diversified business profile, adequate asset-liability management, and low risk investments. The company's operating results have improved, which is expected to continue. Leverage ratios have grown to the limit contemplated by the current rating. Fitch will monitor future actions taken by the company to mitigate additional leverage from premium growth.

During the last six months, Ohio has grown gross written premium (GWP) across all its business lines consistent with 2015 targets. The lines that grew the most were annuities (86% September 2014-September 2015) and disabilities pensions (192 times (x)), the latter driven by 50% participation as a reinsurer of the group operations in Peru.

Fitch views the deterioration in operating results in March 2015 as temporary. As of September 2015 the trends returned to historical norms, with a net loss index of 102.5% and an operational index below 100%, figures that Fitch sees as favorable. While the net results are stable, they remain below peer group results. The return on average assets (ROAA) was 0.4% and 5.2% on its average equity (ROAE), while the peer group showed a ROAA of 0.8% and a ROAE of 10.7%.

Asset-liability management remains conservative supported by a strict regulatory framework. Asset reinvestment risk is low and favorable compared with its peer group, which is reflected in the reinvestment rate used by the regulator (TSA-Tasa de Suficiencia de Activos) of -0.26% for Ohio while the peer group average rate was 1.7%.

Ohio's investment portfolio has a conservative profile with high credit quality and a low allocation to non-investment grade instruments (below 3%). The investment portfolio is represented mostly by fixed income instruments (82.2%) where 48.1% are issued by local corporations.

The company's leverage metrics comply with the regulatory parameters (20x) but compare unfavorably with its historical performance and are at the limit contemplated by the current rating. As of September 2015, operating leverage reached 13.2x. The expected GWP growth could move the current leverage higher. Fitch will monitor capitalizations plans and expects the company to maintain operating leverage near 13x.

RATING SENSITIVITIES
Stable Outlook: Fitch believes that the variations experienced by the company in terms of GWP, leverage and operating results are in line with the current rating. However, sustained increase in operating leverage to over 13 times (x), as well as substantial deterioration in operating results could put downward pressure on the rating. Also, material changes in the investments allocation and credit risk could result in a downgrade. Conversely, strengthening of Ohio's market position in its relevant business segments, coupled with a more diversified GWP breakdown; a sustained improvement in the operating results that lead to capital growth, could positively affect the rating.