03.12.2012 19:30

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El Pacifico - Peruano Suiza -- Moody's affirms El Pacífico - Peruano Suiza's Baa3 insurance financial strength


Buenos Aires City, December 03, 2012 -- Moody's Investors Service has affirmed El Pacífico - Peruano Suiza Compañía de Seguros y Reaseguros' ("PPS") Baa3 insurance financial strength (IFS) rating. The rating outlook remains stable. PPS is a major Peruvian insurer that distributes property and casualty (P&C) and health insurance coverage to individuals, as well as to a wide range of corporations, from small and medium-size enterprises to large businesses. The company is majority-owned by Credicorp Ltd., a leading financial group in Perú.

RATINGS RATIONALE

According to Moody's, PPS's rating affirmation is based primarily on its leadership share of the Peruvian P&C market, its good product diversification, its adequate profitability, and its affiliation with the Credicorp group, which includes the largest Peruvian bank - Banco de Crédito del Perú (rated Baa2 for deposits). Moody's lead analyst for PPS, Diego Nemirovsky, commented: "The company's operations and brand recognition benefit from its affiliation with Credicorp. Furthermore, PPS' integration and identification with its majority-owned life and health subsidiaries, Pacífico Vida and Pacífico Salud, respectively, strengthen the company's presence and diversification in the Peruvian insurance marketplace." The rating agency also positively noted PPS's commitment to financial transparency and disclosure.

Moody's pointed out, however, that these strengths are tempered by several credit concerns and challenges for the company including: 1) the investment risk and volatility associated with its significant equity exposure (e.g. investment in subsidiaries), 2) high exposure to natural catastrophes, given Perú's location along the Andes cordillera and Pacific coastline, 3) weak underwriting results reflected by its high and volatile combined ratio, 4) geographic business concentration, and 5) Peru's weak insurance operating environment. The rating agency also mentioned that the recent acquisition of clinics for PPS' health subsidiary raises concerns, as results will be much dependent on the company's expertise in owning and managing the delivery of healthcare services of these clinics. Moreover, Moody's believes that these acquisitions put strain on PPS' financial profile, given the increase in the company's investment in subsidiaries, and given that part of the funding of these acquisitions came from the issuance of subordinated debt by PPS in the local market, which increased the company's financial leverage.

Commenting on factors that could result in an upgrade for PPS's rating, Moody's cited the following: a significant improvement in Peru's operating environment and/or government bond rating, and a combination of improved profitability (combined ratio consistently below 95%) and capitalization. Conversely, PPS's rating could be downgraded for the following reasons: a significant deterioration in Peru's operating environment and/or government bond rating, sustained underwriting losses, a continued decline in its capital adequacy, a catastrophe event that results in losses greater than 15% of equity, or a substantial reduction in market share.

PPS is headquartered in Lima, Perú, and it reported net income of s/. 75 million and gross premiums written of s/. 743 million for the nine-month period ended September 30, 2012. As of that date, the company reported total assets of s/. 2.1 billion and shareholders' equity of s/. 1.1 billion.

The principal methodology used in rating PPS was Moody's Global Rating Methodology for Property and Casualty Insurers, published in May 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Moody's insurance financial strength ratings are opinions of the ability of insurance companies to pay punctually senior policyholder claims and obligations. For more information, visit our website at www.moodys.com/insurance.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Diego Nemirovsky Vice President - Senior Analyst Financial Institutions Group Moody'sLatin America Ing. Butty 240 16th Floor Buenos Aires City C1001AFB Argentina JOURNALISTS: (800) 666 -3506 SUBSCRIBERS: (5411) 5129 2600 Robert Riegel MD - Insurance Financial Institutions Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Latin America Ing. Butty 240 16th Floor Buenos Aires City C1001AFB Argentina JOURNALISTS: (800) 666 -3506 SUBSCRIBERS: (5411) 5129 2600 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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