Press Release - JULY 14, 2017
A.M. Best Affirms Credit Ratings of Sompo Seguros Mexico, S.A. de C.V.
FOR IMMEDIATE RELEASE
MEXICO CITY - JULY 14, 2017
The ratings of Sompo Mexico reflect the company’s integration and support from its group through its holding company, Sompo America Insurance Company (SAIC), which provides synergies and operating efficiencies to the Mexican subsidiary. Sompo Mexico maintains strong risk-adjusted capitalization, good operating performance and a solid reinsurance program. Partially offsetting these positive rating factors is the company’s small market share, even though its combined ratio and profitability levels compare well with the industry.
Sompo Mexico initiated activities in 1998; the company underwrites property/casualty business and stands as a strategic hub from which its group plans to continue expanding operations into other Latin America markets. Sompo Mexico exclusively underwrites referred business from its group, whose ultimate parent is SOMPO Holdings, Inc.
Sompo Mexico’s strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is supported by the company’s small retention profile, historical positive bottom-line results reflected in good profitability metrics and conservative profit retention policies. Sompo Mexico’s strong underwriting results are mainly a consequence of underwriting referred businesses for the Mexico operations of its group’s global clients, as well as commissions from a diversified reinsurance program with highly rated reinsurers, which includes SAIC as the program leader. In addition, the company’s conservative investment policies provide a steady flow of revenues in support of net income. In 2016, Sompo Mexico maintained its steady operating performance, reflected in an average five-year combined ratio of 6.3% and return on equity of 14.2%. Moreover, the company benefits from being integrated into the group, gaining operational leverage through the same systems, procedures and enterprise risk management practices.
Positive rating actions on the group will most likely result in equivalent rating actions for Sompo Mexico, unless A.M. Best determines that the strategic importance of the Mexican subsidiary to its group has decreased. Sompo Mexico also has to maintain strong risk-adjusted capitalization supported by good technical and bottom-line results in order for positive rating actions to take place. Conversely, the ratings of Sompo Mexico will mirror any negative rating actions taken on the group. Sustained deterioration in operating performance that leads to a significant decline in its risk-adjusted capitalization to levels no longer supportive of the current ratings also would trigger negative rating actions.
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:
The following applied criteria supplemented the analysis of the ultimate rating unit:
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: May 10, 2017
• Date of Financial Data Used: March 31, 2017
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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