AM Best has upgraded the Long-Term Issuer Credit Rating to a+ from a and affirmed the Financial Strength Rating of A (Excellent) and the Mexico National Scale Rating of aaa.MX to MAPFRE M‰XICO, S.A. (MM) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect MAPFRE M‰XICOs 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 (ERM).
The Long-Term ICR upgrade reflects MMs strategic importance to, and strategic alignment with, MAPFRE INTERNACIONAL, S.A., as well as the synergies and operating efficiencies derived from being a group member of MAPFRE S.A., the leading insurer in Spain.
MMs ratings reflect its solid risk-adjusted capitalization, its competitive position in Mexicos insurance industry and adequate ERM practices. Offsetting these positive rating factors is the deterioration in MMs operating performance in 2016, stemming from its previous strategy to expand its market share.
MM operates as a composite insurer of life and non-life business and ranks among Mexicos five-largest insurers based on written premiums.
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MMs written premiums in 2017 presented stable growth after adjusting for the biannual property-liabilities policy of Petr³leos Mexicanos (PEMEX), a state-owned oil and gas company that MM started underwriting in 2015 and renewed in 2017 for USD 546.3 million of premium.
Net income in 2017 shows a much stronger technical performance than in previous years when it was highly influenced by the release of catastrophe reserves. This resulted from an improvement in underwriting, while the company maintained an adequate adjusted growth rate. Financial income positively influences the net result, which ended up at MXN 33 million. As of September 2018, the company has improved its operating performance, posting a combined ratio slightly above 100%.
The companys risk-adjusted capitalization is supportive of the current ratings. In 2017, policyholders surplus decreased in a steeper manner than net required capital derived from dividend payments to its holding company. In the medium term, A.M. Best expects changes in underwriting strategy to continue reflecting in better net results and therefore in a more robust capital base that could give way to a stronger risk-adjusted capitalization, as measured by Bests Capital Adequacy Ratio (BCAR).
ERM practices are well-established and implemented throughout the company and closely follow those set by MAPFRE S.A. This integration has benefited the companys implementation of Mexicos Solvency II-type regulations.
Positive rating actions on its ultimate parent, MAPFRE S.A., also could result in further positive rating actions for MM. Factors that may lead to negative rating actions include weakened risk-adjusted capitalization, either by significant capital outflows or by deterioration of its underwriting quality in subsequent years. In addition, negative rating actions for its ultimate parent would result in a downward movement of MMs ratings.
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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