Fitch: Outlook for Chilean Insurance Sector Remains Stable for 2014

Thu Dec 12, 2013 4:43pm EST

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(The following statement was released by the rating agency) Link to Fitch Ratings' Report: 2014 Outlook: Chilean Insurance Sector (Low Growth and Volatile Net Income Are Expected to Continue) here SANTIAGO, December 12 (Fitch) Fitch Ratings has published its 2014 Outlook report for the Chilean Insurance Sector. According to the report, the Chilean insurance sector outlook remains stable, and indicates that Fitch is highly likely to affirm the ratings of Chilean insurance companies in 2014, barring any unexpected events. The Chilean insurance industry is mature in a regional context. Despite the low dynamism expected for Chile's macroeconomic performance in 2014, Fitch believes that the insurance industry has the ability to adequately navigate in a more challenging environment. Fitch estimates gross written premiums (GWP) growth of around 5% (real)for fiscal 2013. This limited growth trend will continue in 2014, with a foreseeable rise of about 5.0% - 5.5%. While Fitch expects a tariff enhancement on the country's insurance industry's main business lines, the persistence of limited growth will be mainly influenced by a limited economic dynamism in the country. Chile's insurance environment will remain highly competitive and in a mature stage. Fitch estimates that GWP mix will remain stable for the short term, divided into two-thirds for life and one-third for non-life GWP, respectively. The Chilean insurance industry's net income reached CLP189,976 million (USD377 million) as of September 2013, mainly boosted by the life insurance segment. Although profitability ratios as of September 2013 could be perceived as uncompetitive compared with regional peers (ROAA of 0.9% and ROAE 8.0%, annualized), the industry's net income historically has shown volatility as well as wide dispersion of profitability ratios between entities. Fitch believes that Chilean insurance companies have strong reinsurance protection for natural disasters, including earthquakes and tsunamis, and will not undermine the entities' solvency. Earthquakes represent the biggest catastrophe exposure for Chilean non-life insurance entities; however, 27F earthquake in 2010 was a strong stress test for the Chilean insurance industry, which was successfully passed. Chilean insurers are adapting to a number of new initiatives introduced since 2006. This is in line with Fitch's expectations and there is no significant implication on credit ratings in the near term. Contact: Rodrigo Salas Senior Director +(562)-2499-3300 Fitch Chile Clasificadora de Riesgo Ltda. Alcantara 200, Of. 202, Las Condes Santiago, Chile Carolina Alvarez Director +(562)-2499-3300 Santiago Recalde Associate Director +(562)-2499-3300 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable Criteria and Related Research: --'Insurance Rating Methodology -- Amended' (Sept. 05, 2013). ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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