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FOR IMMEDIATE RELEASE
MEXICO CITY - JULY 29, 2016 02:13 PM (EDT)
A.M. Best has assigned a financial strength rating of B (Fair), an issuer credit rating (ICR) of “bb” and a Mexico National Scale Rating of “bbb-.MX” to Armour Secure Insurance S.A. de C.V. (Armour) (Mexico). The outlook assigned to each rating is stable.
Armour’s ratings reflect the company’s strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), strong operating performance and solid reinsurance program. Considerably offsetting these positive factors are the high financial leverage and low capitalization of its holding company, Armour Group Holdings Limited, based on BCAR, which could pressure Armour’s financial flexibility. Also, despite being a market leader in its niche of title insurance, the company’s small market share in Mexico’s insurance industry and concentration in a single line of business mitigate this strength.
Armour was authorized in 2014 by the Mexican Minister of Finance after acquiring the former Fidelity National Title de Mexico, S.A. de C.V. The company underwrites only title insurance and is the market leader in terms of gross written premiums, in a non-saturated market that consists of just three participants.
According to BCAR, Armour had a strong risk-adjusted capital position for year-end 2015, which is supported by positive bottom line results reflected in good and improving profitability metrics. The company’s strong underwriting results are directly linked to the favorable conditions in Mexico’s real estate market. In 2015, Armour’s operating performance was characterized by a combined ratio of 94% and a return on equity of 15.9%. Armour’s performance is in line with the title insurance industry, which is globally characterized by high operating expenses. Moreover, the company maintains an adequate reinsurance program placed entirely with a Lloyd’s syndicate.
Key rating drivers that could lead to positive rating actions for Armour include a considerable reduction in the financial leverage and improvements in the capitalization of its holding company. Key factors that could lead to negative rating actions include a sustained deterioration in operating performance resulting from adverse real estate market conditions or a significant decline in its risk-adjusted capitalization to levels 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:
View a general description of the policies and procedures used to determine credit ratings. Also in accordance with Mexican regulations, the following is a link to required disclosures – A.M. Best America Latina Supplementary Disclosure.
This press release relates to rating(s) that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page.
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