AM Best


AM Best Affirms Credit Ratings of Stewart Title Guaranty de México, S.A. de C.V.


CONTACTS:

Inger Rodriguez
Associate Financial Analyst
+52 55 1102 2720, ext. 108
inger.rodriguez@ambest.com

Alfonso Novelo
Senior Director, Analytics
+52 55 1102 2720, ext. 107
alfonso.novelo@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

MEXICO CITY - AUGUST 16, 2019 12:24 PM (EDT)
AM Best has affirmed the Financial Strength Rating of A- (Excellent), the Long-Term Issuer Credit Rating of “a-” and the Mexico National Scale Rating of “aaa.MX” of Stewart Title Guaranty de México, S.A. de C.V. (STGM) (Mexico). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect STGM’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also reflect the integration of the local subsidiary to its parent company, Stewart Title Guaranty Company (STGC) and to the Stewart Title Group in terms of the business model and operational support. Offsetting these positive rating factors are the company’s small market share in Mexico’s insurance industry and its concentration in a single line of business.

STGM is a subsidiary of STGC, located in Houston, Texas, which, in addition to Mexico, also offers products through its subsidiaries to markets in the United States, the European Union, Australia, Costa Rica and China. Given the specialized nature of the title product and the institutional strategy, STGM’s sales efforts are focused on business referred by the parent company on existing customers, which generates a reduced number of policies per year in a Mexican market consisting of just two participants, in which STGM holds a market share of 28.8%, as of 2018.

STGM’s capitalization stands at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), with an upward trend in capital and surplus growth during the past five years, mainly driven by consistent positive bottom-line results, with underwriting risk being the main component for required capital. Support from STGC in the past has come through capital injections directed to help strengthen the business when required.

The operating performance of STGM has been positive for the past five years, which can be attributed mainly to the optimization of the business strategy carried out in 2012-2013, which remains unchanged. This allowed STGM to reduce expenses through a variable cost scheme. However, the company is exposed to foreign exchange risk, as a big part of the investment portfolio is in U.S. currency, and volatility, due to its small size.

Positive rating actions on the main operating subsidiaries of Stewart Title Group that result from positive underwriting performance trends, accompanied by growth in risk-adjusted capitalization, will prompt the ratings of STGM to move in tandem. Conversely, negative rating actions on Stewart Title Group due to a significant deterioration in operating performance that causes a decline in risk-adjusted capitalization levels, or if the group experiences liquidity issues, or a significant increase in leverage, will also result in a ratings downgrade for the Mexico subsidiary.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, 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:


  • Best’s Credit Rating Methodology (Version Dec. 20, 2018)

  • Understanding BCAR of U.S. Property/Casualty Insurers (Version May 9, 2019)

  • Rating Title Insurance Companies (Version Aug. 01, 2019)

  • A.M. Best’s Ratings On a National Scale (Version Oct. 13, 2017)

The following applied criteria supplemented the analysis of the ultimate rating unit:


  • Evaluating Country Risk (Version Oct. 13, 2017)

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: July 26, 2018

  • Date Range of Financial Data Used: December 31, 2013-December 31, 2018

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.

AM Best does not validate or certify the information provided by the client in order to issue a credit rating.

While the information obtained from the material source(s) is believed to be reliable, its accuracy is not guaranteed. AM Best does not audit the company’s financial records or statements, or otherwise independently verify the accuracy and reliability of the information; therefore, AM Best cannot attest as to the accuracy of the information provided.

AM Best’s credit ratings are independent and objective opinions, not statements of fact. AM Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. AM Best’s credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions. View our entire notice for complete details.

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AMB# Company Name
078087 Stewart Title Guaranty de México SA CV