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FOR IMMEDIATE RELEASE
MEXICO CITY - FEBRUARY 23, 2018 02:56 PM (EST)
A.M. Best has affirmed the Financial Strength Ratings of B++ (Good), the Long-Term Issuer Credit Ratings of “bbb+” and the Mexico National Scale Ratings of “aa+.MX” of Assurant Daños México, S.A. (ADM) and Assurant Vida México, S.A. (AVM). The outlook of these Credit Ratings (ratings) is positive. Both companies are domiciled in Mexico City, Mexico.
The ratings reflect ADM’s and AVM´s balance sheet strength, which A.M. Best categorizes as strong, as well as their adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM),respectively.
The ratings of ADM and AVM also reflect their affiliation and strategic importance to Assurant, Inc. as a stepping stone to grow in the Latin America market, as well as their risk-adjusted capitalization at strongest levels, respectively. The ratings also consider the strong reinsurance structure mainly supported by the group. Partially offsetting these positive rating factors are the small market share of both companies and the possibility of increasing competition within their niche markets.
ADM and AVM initiated operations in 2004 and are owned by Assurant Holding Mexico, S. de R.L. de C.V., which is part of Assurant, Inc., the subsidiaries’ ultimate parent. Distribution channels for both companies are based on sales through financial institutions, auto companies and telecom carriers, and retailers among others.
ADM and AVM follow their group’s underwriting, ERM and corporate governance practices, receive reinsurance support, and benefit from its brand recognition in order to expand their market share in Mexico. Both subsidiaries also benefit from their group’s capital contributions, whenever required, in support of growth targets.
In 2017, ADM maintained its risk-adjusted capitalization at strongest levels mainly supported by reinvestment of earnings. The company’s efforts to enhance underwriting efficiency continued; however, an increase in ceded premium coupled with retained businesses in runoff slightly pressured underwriting results. Despite the latter, improvements in investment income mainly driven by an increase in interest rate, continued to support profitability metrics as demonstrated by a 13.4% return on equity at year-end 2017. A.M. Best expects the company to maintain adequate retention levels supportive of profitability and risk-adjusted capitalization levels in the short to medium term.
In 2017, AVM’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remained at strongest levels mainly supported by positive bottom line results. Despite adjustments to the operating expense structure of the company, operating performance remains at adequate levels as reflected by a return on assets of 3.8% in 2017. Furthermore, the subsidiary has begun to reduce its dependence on capital injections from its group.
Factors that could lead to positive rating actions for ADM include improvements in operating performance, while maintaining risk-adjusted capitalization metrics at strongest levels, as measured by Best´s Capital Adequacy Ratio Model. On the contrary, negative rating actions could take place if substantial deterioration of operating performance or aggressive growth in premiums lead to a drop in risk-adjusted capitalization to levels no longer supportive of the current ratings.
Positive rating factors that could lead to an upgrade for AVM’s ratings are sustained improvements in underwriting results that continue to strengthen its capital base and reduce its dependence on capital support from its group. Negative rating factors that could result in a downgrade include material deterioration in underwriting performance that results in a decline in risk-adjusted capitalization.
Negative rating actions also will occur if A.M. Best’s considers that parental support or strategic importance to its group for both subsidiaries deteriorates.
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. 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.
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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