Best’s News & Research Service - August 12, 2022 03:38 PM (EDT)
AM Best Removes From Under Review With Negative Implications, Affirms Credit Ratings of Grupo Mexicano de Seguros, S.A. de C.V.
- August 12, 2022 03:38 PM (EDT)
Mexico City //BestWire// - AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating of B++ (Good), the Long-Term Issuer Credit Rating of “bbb+” (Good) and the Mexico National Scale Rating (NSR) of “aa+.MX” (Superior) of Grupo Mexicano de Seguros, S.A. de C.V. (GMX) (Mexico). The outlooks assigned to these Credit Ratings (ratings) is positive.
The ratings reflect GMX’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The positive outlooks reflect the company’s ability to maintain profitable results even in adverse scenarios, with underwriting performance characterized by premium sufficiency, and profitability further strengthened by investment income.
GMX signed a settlement agreement to pay the Mexico City Subway System 1,300 million pesos for the claims regarding the fire in one of its control pits and the collapse of the elevated pass in its twelfth line. As of April 2022, the company has paid 1,300 million pesos. GMX has recovered 750 million pesos from reinsurance, with another 400 million pesos still pending. The materialization of this payment did not have a significant effect in GMX’s risk adjusted capitalization, which remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), for all years.
The ratings also reflect GMX’s affiliation with its immediate parent, GMS Valore, S.A. de C.V., which provides GMX with synergies and operating efficiencies as a member of this group. Offsetting these positive rating factors is the strong competitive environment GMX experiences in its main business lines, which could pressure future underwriting performance.
The company initiated operations in Mexico City in 1998. GMX ranks among the top 10 insurers in Mexico’s property/casualty segment, with 8% market share as of March 2022, based on direct premiums written. The company’s chief business line is general and professional liability, and it operates mainly through a network of independent agents and promoters, as well as online sales.
GMX has strengthened its capital base consistently as a result of positive bottom-line results over the years, which have provided the company with the capacity to withstand a significant rise in claims. The company’s underwriting performance can be characterized by premium sufficiency for over six years. Profitability is achieved by underwriting results and further enhanced by investment income, which has improved in recent years, as GMX’s shifts toward a less conservative strategy, reflecting the greater sophistication of the company’s operations.
The company has been able to grow continuously during the past seven years, by taking advantage of its digital channel and technological capabilities. GMX’s management team has a solid track record of implementing strategies and taking advantage of opportunities for innovation in Mexico’s insurance market given the increased competition.
Positive rating actions could occur if GMX is able to maintain premium sufficiency, and that translates into an upward trend of positive bottom-line results, or if its internationalization efforts result in steady premium growth that improves geographic diversification and widens the company’s market scope. Factors that may also lead to positive rating actions include GMX’s ability to maintain its risk-adjusted capitalization at the strongest level, as measured by BCAR. Negative rating actions could take place should GMX experience a continued deterioration of underwriting results that ultimately erodes the company’s capital base and weakens its balance sheet strength.
The methodology used in determining these ratings is Best’s Credit Rating Methodology (Version Nov. 13, 2020), which provides a comprehensive explanation of AM 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:
- Evaluating Country Risk (Version Oct. 13, 2017)
- Understanding Global BCAR (Version June 30, 2022)
- Catastrophe Analysis in AM Best Ratings (Version Oct. 13, 2017)
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- AM Best’s Ratings On a National Scale (Version Oct. 13, 2017)
- Scoring and Assessing Innovation (Version March 5, 2020)
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 Guide to Best’s Credit Ratings.
- Previous Rating Date: Feb. 11, 2022
- Date Range of Financial Data Used: Dec. 31, 2016-March 31, 2022
This press release relates to rating(s) that have been published on AM Best’s website. For additional rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page.
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AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.