MEXICO CITY--(BUSINESS WIRE)--A.M. Best has assigned a financial strength rating of C++ (Marginal), an issuer credit rating of “b+” and a Mexico National Scale Rating of “bb.MX” to Nezter Seguros, S.A. de C.V. (Nezter Seguros) (Mexico). The outlook assigned to all ratings is stable.
Nezter Seguros’ ratings reflect the lack of a track record in terms of operating performance, a challenging business plan and limited brand awareness in the title insurance market in Mexico, given its recent acquisition. Mitigating these negative factors, A.M. Best considers the company’s strong capital position supported by the new ownership together with a solid reinsurance program placed upon a counterparty with a good level of security. In addition, while A.M. Best considers Nezter Seguros’ business plan to be ambitious, the company relies on a new and experienced management team focused on achieving its growth targets while maintaining compliance and adherence to regulatory requirements.
Nezter Seguros is a newly constituted local property title insurance company, authorized in 2015 by the Mexican Minister of Finance after acquiring the former First American Title Insurance Mexico, S.A. It intends to place itself within a non-saturated market that consists of just three participants. Initial underwriting activity is expected to take place during the first quarter of 2016. The recent acquisition nature of the company places a burden on their brand recognition and is viewed as a challenge in implementing their growth strategy.
The ratings mirror a management team that has deep expertise within the legal and risk management framework in Mexico, with distinctive focus on property title insurance. Nezter Seguros has a fully incorporated set of guidelines and internal compliance committees to supervise and control each of the activities that bear risk over the company, establishing limits for every risk undertaken on a conservative scheme defined in its enterprise risk management manual.
According to Best’s Capital Adequacy Ratio (BCAR), Nezter Seguros has a strong capital position for year-end 2015, driven by the fact that no underwriting took place during this period. If the company meets its growth targets for 2016 and 2017, its capital position will most likely be strained, which would result in a need for future capital contributions. Furthermore, pressure from fixed expenses over capitalization could result from a delay in underwriting plans. The company possesses a solid reinsurance program placed entirely with a Lloyd’s syndicate, which will support the company’s premiums expansion should growth targets materialize.
Positive rating actions could occur if the company successfully implements its business plan, allowing the company to reduce the burden from its fixed expenses, while maintaining strong levels of capital adequacy. On the other hand, substantial deterioration in capital levels, whether resulting from poor operational performance or explosive growth in underwriting, could trigger negative rating actions.
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:
- A.M. Best's Ratings On a National Scale
- BCAR for Title Insurance Companies
- Evaluating Country Risk
- Rating New Company Formations
- Rating Title Insurance Companies
- Risk Management and the Rating Process for Insurance Companies
- Understanding Universal BCAR
View a general description of the policies and procedures used to determine credit ratings. Also in accordance with Mexican regulations, the following is a link to required disclosures – A.M. Best America Latina Supplementary Disclosure.
- Previous Rating Date: Not Rated
- Date of Financial Data Used: Dec. 31, 2015
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.
A.M. Best’s credit ratings are independent and objective opinions, not statements of fact. A.M. Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. A.M. Best’s credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions. View our entire notice for complete details.
A.M. Best receives compensation for interactive rating services provided to organizations that it rates. A.M. Best may also receive compensation from rated entities for non-rating related services or products offered by A.M. Best. A.M. Best does not offer consulting or advisory services. For more information regarding A.M. Best’s rating process, including handling of confidential (non-public) information, independence, and avoidance of conflicts of interest, please read the A.M. Best Code of Conduct.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2016 by A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED.