AM Best has affirmed the Financial Strength Rating of A++ (Superior), the Long-Term Issuer Credit Rating (Long-Term ICR) of aa+ and the Mexico National Scale Rating of aaa.MX of Seguros Monterrey New York Life, S.A. de C.V. (SMNYL) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect SMNYLs balance sheet strength, which A.M. Best categorizes as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The ratings also reflect SMNYLs strong integration with its parent company, New York Life Insurance Company (New York Life) (FSR A++, Long-Term ICR aaa), strengthened risk-adjusted capitalization, robust ERM, positive trend in operating performance and highly competitive position in Mexicos life insurance segment. Partially offsetting these positive rating factors are its challenging expansion strategy within Mexicos very competitive market and the uncertainty regarding future interest rate shifts.
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 2018, SMNYL was Mexicos seventh-largest insurer with a market share of 5.3%. The companys product portfolio is composed of individual life (67%), individual medical expenses (19%), group medical expenses (10%) and group life (4%).
SMNYL benefits from its ultimate parents strong brand recognition. In addition, its integration within its group is key to the rating level, as New York Life actively supervises SMNYLs strategy and operations, further enhancing its corporate governance and product innovation. Within New York Lifes international structure, the Mexico operation stands out as one of the most significant in terms of its good profitability and market presence, which makes the subsidiarys operation and strategy very likely to be supported by the group if required.
During 2017, the company continued to grow above the life segment market pace, improving its bottom-line results and posting good underwriting metrics in relation to the market and its past performance despite larger benefits paid to net premiums ratio, only reflecting the good previous mortality and morbidity experience of the company. A.M. Best expects SMNYL to maintain its good underwriting performance; net income is expected to benefit from the volatility in international and domestic markets while maintaining a prudent investment strategy. Due to the companys robust ERM 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 policy that supports the profitability of its operation.
Risk-adjusted capitalization is categorized as strongest, despite a significant dividend payment made in 2018 that did not materially affect AM Bests view of the companys risk-adjusted capitalization. Looking forward, AM Best expects that SMNYLs capital management capabilities will benefit base capital through a strong net income and non-material dividend payments. Due to the nature of the life business and its investment component, SMNYL is susceptible to changes in interest rates, which are expected to moderately increase during 2019. However, most of its investment portfolios are in line with the characteristics of it liabilities and groups guidelines, placing the company in a favorable position to mitigate such increases.
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 Long-Term ICR include success with the companys expansion goals; maintenance of its profitability trend; and strengthening of its capital base because of improved operating performance. Negative rating actions could occur if the companys risk-adjusted capitalization becomes affected either by large capital outflows or by weaker operating performance in the medium term due to large and sustained increases in operational and acquisition expenses or benefits paid derived from the expansion strategy. Furthermore, negative rating actions could result if AM Bests view on the strategic importance of the Mexico subsidiary to its group decreases or if there are negative rating actions on New York Life.
This press release relates to Credit Ratings that have been published on AM Bests website. For all 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 Bests Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Bests Credit Ratings. For information on the proper media use of Bests Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Bests Credit Ratings and AM Best Rating Action Press Releases.
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