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FOR IMMEDIATE RELEASE
MEXICO CITY - FEBRUARY 09, 2016 04:03 PM (EST)
A.M. Best has assigned a financial strength rating (FSR) of A++ (Superior), an issuer credit rating (ICR) of “aa+” and a Mexico National Scale Rating of “aaa.MX” to Seguros Monterrey New York Life S.A. de C.V. (SMNYL) (Mexico City, Mexico). The outlook assigned to all ratings is stable.
The ratings reflect SMNYL’s strong integration with its parent company, New York Life Insurance Company (New York Life) (FSR A++, ICR “aaa”), stable and solid risk-adjusted capitalization, good operating performance, relevant competitive position in Mexico’s life insurance segment and its robust enterprise risk management. Partially offsetting these positive rating factors is its challenging expansion strategy within Mexico’s very competitive market, particularly for individual life products.
SMNYL is the Mexico subsidiary of New York Life and a product of the Seguros Monterrey acquisition in 2000. SMNYL, established in Mexico in 1940, mainly underwrites life products through a solid agent network. As of September 2015, SMNYL was the seventh largest insurance company in Mexico with a market share of 5.1% and ranks fifth in the life segment with a market share of 8.8%. The company’s product portfolio is composed of individual life (67%), group life (4%), individual medical expenses (18%), group medical expenses (10%) and accidents and health (1%).
SMNYL benefits from its ultimate parent’s strong brand recognition. In addition, its integration within its group is key to the rating level as New York Life actively supervises SMNYL’s strategy and operations, further enhancing its corporate governance and innovation in products. Within New York Life’s international structure, the Mexico operation stands out as one of the most significant in terms of its good profitability and market presence in Mexico, which makes the subsidiary’s operation and strategy very likely to be supported by the group if required.
During 2014 and 2015, the company continued to post good results, maintaining adequate premium sufficiency, a satisfactory performance of benefits paid and a supportive investment income. Prospectively, as the company makes commercial efforts to improve its market position, there might be room for larger benefits offered or an increase in operating and acquisition expenses. However, due to the company’s robust enterprise risk management and corporate governance capabilities, A.M. Best believes that SMNYL has sufficient technical tools and market expertise to achieve an adequate balance between growth and profitability. In addition, the company presents an adequate investment yield that supports the profitability of its operation based on sound investment policies in line with the characteristics of liabilities and its group’s guidelines.
Risk-adjusted capitalization is strong and could be further enhanced from regulatory changes in Mexico’s reserve requirements, following the best estimate of liabilities. Under this scenario, reserve releases might further enhance its capitalization in the middle term. The company has very good asset liability management in terms of foreign currency and duration.
A.M. Best considers SMNYL to be well-positioned at its current rating levels. Future positive rating factors that could lead to an improvement in the ICR include: success with the company’s expansion goals; improvement in its profitability trend; and strengthening of its capital base as a result of improvements in its operating performance. Negative rating actions could occur if the company’s operating performance weakens in the medium term due to large and sustained increases in operational and acquisition expenses or benefits paid derived from the expansion strategy of the business, materially weakening its profitability and, consequentially, its capitalization. Furthermore, negative rating actions for New York Life could also result in a negative rating action on SMNYL.
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 visit A.M. Best’s Ratings & Criteria Center.
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