OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has upgraded the financial strength rating to B (Fair) from B- (Fair) and issuer credit rating to “bb” from “bb-” of Quálitas Compañia de Seguros S.A.B. de C.V. (Qualitas) (Mexico). The outlook for both ratings is stable.
The rating upgrades reflect Qualitas’ leading market position in the increasingly competitive Mexican automobile insurance segment, its formidable distribution network and solid overall profitability in recent years. Qualitas operates through a network of local agents, financial institutions and service offices and has established a formidable distribution capability throughout Mexico. This has enabled the company to maintain its leading market position in the Mexican automobile insurance segment in extremely challenging economic and market conditions. Qualitas reported favorable underwriting net income in 2012, reflecting its highest historical operating performance.
Offsetting rating factors include Qualitas’ consistently elevated underwriting leverage and trend of underwriting losses. Historically, the company has operated with underwriting leverage considered higher than expected for an automobile insurance provider. Additionally, Qualitas maintains combined ratios just above breakeven due to its high level of loss and loss adjustment expenses recorded each year.
Key rating drivers that could lead to positive rating actions for Qualitas include continued favorable trends in revenues and earnings, capital growth and improvement in the underwriting leverage. Key factors that could lead to negative rating actions include unfavorable operating performance or weakened risk-adjusted capital.
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.
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