Istmo Compañía de Reaseguros, Inc.

What it is

Istmo Compañía de Reaseguros was founded in 1979 in Panama as a specialist reinsurer — meaning it sold insurance to other insurance companies, covering the claims those companies could not absorb alone.

The company specialised in reinsurance and built a presence in more than twenty countries throughout Central and South America, serving small and medium-size local insurers with a traditional reinsurance product base.

Over the decade to 2012, premiums written grew from $61.0 million to $149.7 million, while its capital base rose from $17.9 million to $144.8 million, backed at various points by institutional investors including the IFC and the Inter-American Investment Corporation.

Who owns it

The company listed on the Bolsa de Valores de Panamá in 1999. At the time of a major IDB Invest transaction, the company was 60% Panamanian-owned; the remaining 40% was controlled by Australia’s QBE Insurance Group.

In July 2013, IIG Holdings, Inc. — a holding vehicle created by the controlling shareholders — acquired QBE’s 38.37% minority stake; the directors of IIG included Ramón Fernández Quijano (President), Gilberto Vega, Ricardo Manuel Arango, Alberto Villageliu, and Ricardo Batista. After that buyout the company was majority-controlled by Panamanian domestic investors led by the Fernández family; the exact post-2013 ownership split is not disclosed in available sources.

Who runs it

As of the company’s 30th anniversary in 2009, it was directed and led by Ramón E. Fernández Quijano, director and president.

Fernández Quijano remained president through the 2013 QBE buyout.

Following the April 2017 forced-liquidation order, legal representation, administration and control of the company passed to a court-appointed Liquidation Board — Junta de Liquidación — composed of José Ángel Hidrogo C. and Lourdes Loo de Biancheri.

No active CEO exists; the company is managed solely by those liquidators.

The money, in plain words

At its peak in 2008, the company wrote more than $202 million in premiums — that was the revenue line for a reinsurer. By 2012, premiums had retreated to $149.7 million and the publicly reported capital stood at $144.8 million.

No audited annual results are publicly available for 2013 onward.

According to unaudited financial data the company filed with the exchange, its consolidated total assets reached $418 million at mid-2016 — yet regulators stated there was “significant deterioration in the financial, administrative and operational condition of the company, putting the interests of reinsured parties, creditors and stakeholders at risk.”

A Panamanian law firm filed a criminal complaint alleging the company had falsified its published financial statements, pointing to a claims reserve of $33.4 million reported as of 31 December 2015 that appeared inconsistent with the company’s inability to pay known claims. All financial metrics — net margin, return on equity, price-to-earnings ratio, dividend yield — are not applicable for a company in forced liquidation.

What it is doing now

Panama’s Superintendencia de Seguros y Reaseguros ordered the company’s intervention at the end of 2016 after it failed to maintain the minimum required capital to operate. The regulator then ordered forced liquidation, citing the company’s failure to remedy the deficiencies that had triggered the takeover.

Trading in REIS.PA shares was suspended on 13 December 2016; the Latinex exchange page lists the company under Grupo ASSA, S.A. y Subsidiarias for document filing purposes, but the company itself is being wound down. Istmo had operations in Panama, Costa Rica, Colombia, Mexico and London; its majority shareholding in Costa Rican insurer Aseguradora del Istmo (Adisa) was sold off, with the separation driven by Istmo Re’s financial situation.

What to watch

• Creditor resolution: the Liquidation Board has published a ranked creditor list covering dozens of Latin American insurers and brokers — the pace and recovery rate of those claims is the only live financial story here.
• Subsidiary disposals: as part of the liquidation process the board received offers from two companies for certain subsidiaries; the outcome of those sales determines what creditors ultimately recover.
• Regulatory precedent: the collapse of what was once a $200 million-premium regional reinsurer prompted Panama to tighten its reinsurance law; any revision of Law 63 of 1996 is worth tracking for the wider market.
• Exchange listing: the REIS.PA ticker remains on Latinex in suspended status; formal delisting or a reinstatement order from the SMV would be the final legal milestone.

This is news, not investment advice.