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Rating Action:

MOODY´S RATES SEGUROS ILLIMANI A3.bo FOR INSURANCE FINANCIAL STRENGTH ON BOLIVIA´S NATIONAL SCALE AND Caa1 ON GLOBAL LOCAL-CURRENCY SCALE

 The document has been translated in other languages

05 Jul 2006
MOODY´S RATES SEGUROS ILLIMANI A3.bo FOR INSURANCE FINANCIAL STRENGTH ON BOLIVIA´S NATIONAL SCALE AND Caa1 ON GLOBAL LOCAL-CURRENCY SCALE

Buenos Aires, July 05, 2006 -- Moody´s Latin America has assigned insurance financial strength ratings to Seguros Illimani S.A. of A3.bo on Bolivia's national rating scale and Caa1 on the global local-currency rating scale. Both ratings have a stable outlook.

Seguros Illimani is a property and casualty primary insurer that is highly specialized in motor and car accident liability insurance. The company is privately-owned by several Bolivian businessmen, with one individual owning about 95% of the company's shares.

According to Moody's, Illimani's ratings reflect the relatively weak financial fundamentals of the company in comparison to other property and casualty primary insurers in the Bolivian market. The company's poor profitability is indicated by Illimani reporting underwriting losses in four of the last five fiscal years. In addition, Seguros Illimani is one of the smallest participants in this market, with its market share being 2.5% as of December 31, 2005, ranking it seventh among its competitors.

The rating agency said that during the most recent fiscal year, Illimani's loss ratio rose significantly, largely due to an increase in incurred claims in the motor and mandatory automobile accident insurance line (i.e. SOAT). This led to a net loss for the company and a decline in its shareholders' equity for the fiscal year ended December 31, 2005. Moody's noted that SOAT is a mandatory insurance coverage which is facing a declining trend in prices as a result of increased competition among the major local players. However, the rating agency also commented that Illimani's 47% premium growth over the last four fiscal years has led to a favorable reduction in expense ratios from 56% of net premiums written to 51% at year-end 2005.

Moody's also commented that the credit quality of the company's investment portfolio is a concern. As of December 31, 2005, 24% of total cash and invested assets were B3-rated foreign-currency Bolivian sovereign assets, and another 37% of the investment portfolio is comprised of Caa1-rated foreign-currency bank deposits. The remaining 39% of investments is composed of rated corporate bonds and other non-rated assets.

According to Alejandro Pavlov, VP-Senior Analyst, "Illimani faces intense competition in its core business lines, which has contributed to operating losses. That said, Moody's views Illimani's asset composition as being relatively better -- in terms of premium receivables and cash and invested assets, etc. -- than the market average." In addition, Pavlov positively noted the company's access to a diverse set of distribution channels -- including independent agents, local brokers, direct sales, and Illimani´s branches.

Moody's said Illimani's rating could be upgraded if the company exhibits a sustained trend toward break-even underwriting results, with a combined ratio at or below 100%, combined with greater diversification in its lines of business. Additional net losses -- representing 15% or more of current shareholder´s equity, and/or a deterioration in the company's investment portfolio could lead to a rating downgrade.

Based in La Paz, Seguros Illimani reported gross premiums of above Bs. 20.2 million and a Bs. 0.69 million net loss for the first quarter of 2006 fiscal year ended March 31, 2006. As of that date, Illimani's shareholders' equity was about Bs. 15.1 million and total assets exceeded Bs. 45.9 million.

NOTE: Moody´s national scale insurance financial strength ratings rank an enterprise's financial strength on a relative basis in comparison with other firms within the same country. Such ratings are designed for use at the local (national) level, and they are not globally comparable. For Bolivian companies, national scale ratings carry the identifier of ".bo". In contrast, global local currency insurance-financial strength ratings indicate the relative credit risk of an insurance company on a globally comparable scale. In the case of ratings of insurers domiciled in a country with a speculative grade sovereign rating (i.e. Bolivia), these ratings are the result of, among several factors, the political risk, the risk of a generalized debt moratorium, the weakness of the legal environment or framework, and by the risk of interference in the functioning of the financial system. Taken together, the national scale and global local currency ratings provide a more comprehensive opinion about the credit risk of the company. Moody's insurance financial strength ratings are opinions about the ability of insurance companies to punctually repay senior policyholder claims and

For more information, please visit our website at www.moodys.com/insurance.

Buenos Aires, Argentina

Alejandro Pavlov

Vice President / Senior Analyst

Insurance Group

Moody´s Latin America

Tel: 011-5411-4816-2332 ext. 107.

New York

Alan Murray

VP - Senior Credit Officer

Financial Institutions Group

Moody's Investors Service

JOURNALISTS: 212-553-0376

SUBSCRIBERS: 212-553-1653

New York
Robert Riegel
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Buenos Aires
Alejandro Pavlov
Vice President - Senior Analyst
Financial Institutions Group

No Related Data.
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