PRESS RELEASE

Moody's: Outlook for Uruguay's Insurance Sector Is Mostly Stable

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Friday, November 3, 2017

PRESS RELEASE: Moody's: Outlook for Uruguay's Insurance Sector Is Mostly Stable

Buenos Aires City, November 01, 2017 -- Uruguay's P&C and life insurance industry has a stable outlook, reflecting the expectation that premiums will grow in line with economic activity over the next 12 to 18 months, Moody's Investors Service says in a new report.

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After more than a year of sluggish insurance activity, Moody's expects P&C and life insurance premiums will grow in line with GDP, which is forecasted to rise 3.3% in 2017 and 3.1% in 2018. Premium growth will be driven by the recovery in car sales (after a fall of 10% in 2016), as well as a recovery in foreign trade and construction that will boost growth in surety, cargo and property insurance.

Moody's outlook for the pension segment is negative, however, driven by a significant mismatch between assets and liabilities. Pension insurance premiums will continue growing rapidly, as an increasing number of workers attain retirement age.

"Pension products are exposed to significant asset-liability management challenges arising from the local market's lack of investment securities needed to hedge annuities, and also resulting from longevity risk,"

explains Moody's AVP-Analyst Marcelo De Gruttola. "If the government follows through on recent announcements suggesting it could issue debt instruments that will hedge annuity liabilities, it would be credit positive for this segment."

Headwinds for the P&C and life segments include underwriting losses and low interest rates, which will continue to pressure profitability. Though profitability remains adequate, combined ratios are likely to remain above 100%, given high competition in the P&C segment. Moreover, low market interest rates will continue impacting investment results, which has been necessary to maintain net profits both in P&C and especially on longer term life insurance products.

Moody's research subscribers can access this report at

https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1086356