AM Best Upgrades Issuer Credit Rating and National Scale Rating of Grupo Mexicano de Seguros, S.A. de C.V.

AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to bbb+ from bbb and the Mexico National Scale Rating (NSR) to aa+.MX from aa.MX, as well as affirmed the Financial Strength Rating (FSR) of B++ (Good) of Grupo Mexicano de Seguros, S.A. de C.V. (GMX) (Mexico City, Mexico). The outlook of the Long-Term ICR and the NSR has been revised to stable from positive, while the outlook for the FSR remains stable.

The Credit Ratings (ratings) reflect GMXs 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 upgrade of GMXs Long-Term ICR and NSR primarily reflects the improved level of risk-adjusted capitalization, as measured by Bests Capital Adequacy Ratio (BCAR), mainly driven by positive bottom-line results.

The ratings also reflect GMXs improved underwriting practices, a reinsurance program placed with counterparties with strong levels of security and a well-planned business strategy, as well as GMXs affiliation with its immediate parent, GMS Valore, S.A. de C.V. (formerly Grupo Maxasem), which includes the synergies and operating efficiencies the company benefits from as a member of this group. Offsetting these positive rating factors is the strong competitive environment GMX experiences in its main business lines, which could pressure future underwriting performance.

The company initiated operations in Mexico City in 1998. GMX underwrites property/casualty insurance and ranked 11th in this segment, with 3.5% market share as of September 2018, based on written premiums. The companys main business line is personal liability, and it operates mainly through a network of independent agents and promoters, as well as online sales.

GMXs overall underwriting results have significantly improved from the past years, as combined ratio has remained below the 100% threshold since 2015. During 2017, the company improved underwriting results mainly due to the changes in accounting derived from the Solvency II-type regulation, which allowed for a slimmer valuation of reserves, enhancing overall profitability. As of November 2018, the company maintained adequate underwriting performance and investment yield, and recorded positive bottom-line results.

GMXs management team has a solid track record in terms of implementing strategy and taking advantage of opportunities for innovation in Mexicos insurance market given the increased competition.

Factors that may lead to positive rating actions include sustained improvement in the companys underwriting performance and material enhancements in its risk-adjusted capitalization.

Negative rating actions could occur should GMX experience a continued deterioration of underwriting results or a decline in balance sheet strength. A substantial and sustained lack of coverage for regulatory capital requirements also could create negative rating pressure.

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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Olga Rubo
Associate Financial Analyst
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