Best’s News & Research Service - October 11, 2018 02:23 PM (EDT)
A.M. Best Upgrades Credit Ratings of General de Seguros S.A.B.
- October 11, 2018 02:23 PM (EDT)
Mexico City //BestWire// - A.M. Best has upgraded the Financial Strength Rating to A- (Excellent) from B++ (Good), the Long-Term Issuer Credit Rating to “a-” from “bbb+”, and the Mexico National Scale Rating (NSR) to “aaa.MX” from “aa+.MX” of General de Seguros S.A.B. (Genseg) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Genseg’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The rating upgrades reflect Genseg’s balance sheet strength that is underpinned by risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), improving underwriting results, consistent inflow of investment income, experienced management team and solid reinsurance program. The ratings also recognize Genseg’s affiliation and strategic importance to its ultimate parent, Peña Verde, S.A.B., a leading group in Mexico’s (re)insurance industry, which provides synergies and operating efficiencies. Partially offsetting these positive rating factors is the strong competitive landscape in its main business lines. Genseg initiated operations in Mexico City in 1970. The company mainly underwrites motor, agriculture and life insurance. The company ranked as Mexico’s 26th largest insurer in 2017 with a market share of 0.57%. Genseg operates with a network of independent agents, brokers and commercial offices throughout Mexico.
The company has increased capital and surplus consistently at a compound annual growth rate of 5.7% over the past five years. The company’s capitalization is further supported by a reinsurance program with highly rated entities. The company’s capitalization and liquidity have provided Genseg with flexibility in order to cover deviations in claims or volatile securities market conditions without having to realize losses in its investment portfolio. In 2017, Genseg’s profitability continued to depend on investment income.
Moreover, stable claims containment within Genseg´s motor insurance line, coupled with positive effects of reserves release derived from the implementation of Solvency II-type regulation, continue to improve underwriting practices and have positively impacted operating performance as reflected by combined ratios converging towards 100% at year-end 2017. A.M. Best expects Genseg to sustain this trend through year-end 2018, despite challenges arising from a very competitive and maturing market.
Factors that may trigger positive rating actions include stable profitability metrics performing in line with higher rated peers and good short-term performance in its motor business. The company’s current ratings could come under pressure should soft market conditions continue and if a lack of underwriting discipline generates results and overall profitability that fall short of A.M. Best’s expectations or if capitalization is no longer supportive of the current ratings.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- A.M. Best´s Ratings on a National Scale (Version Oct. 13, 2017)
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- Catastrophe Analysis in A.M. Best Ratings (Version Oct. 13, 2017)
- Evaluating Country Risk (Version Oct. 13, 2017)
- Understanding Universal BCAR (Version May 14, 2018)
View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, please refer to Understanding Best’s Credit Ratings.
- Previous Rating Date: Oct. 5, 2017 (FSR and Long-Term ICR); Oct. 13, 2017 (NSR)
- Date of Financial Data Used: June 30, 2018
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