MEXICO CITY--(BUSINESS WIRE)--A.M. Best has upgraded the Financial Strength Rating to B- (Fair) from C++ (Marginal), the Long-Term Issuer Credit Rating to “bb-” from “b+” and the Mexico National Scale Rating to “bb+.MX” from “bb.MX” of ANA Compañía de Seguros S.A. de C.V. (ANA) (Mexico). The outlook of these Credit Ratings (ratings) has been revised to positive from stable.
The rating upgrades reflect adequate risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR), an improving trend in operating performance, stringent cost discipline and the company’s affiliation with its immediate parent, GMS Valore, S.A. de C.V. (formerly Grupo Maxasem) (GMS Valore), which affords ANA synergies and operating efficiencies as a member of this group. Offsetting these positive rating factors is the company’s a relatively small size within the industry’s highly competitive environment and its concentration in a single business line.
ANA was established in Mexico in 1995 and acquired by GMS Valore in 2002. The company exclusively underwrites auto insurance. ANA operates through a network of local agents, auto dealers and service offices throughout Mexico.
ANA’s underwriting risk historically stands as the main component affecting required capital. In addition, the company’s coverage of its regulatory solvency requirement has increased, but could experience pressure derived from growth or poor operating performance. While risk-adjusted capitalization diminished slightly in 2016 on ANA’s premium growth, its BCAR score remains supportive of the ratings. Conversely, the company has benefited historically from the support of GMS Valore in terms of previous capital injections and synergies with other group members.
ANA strengthened its underwriting policies during 2014 and 2015, which finally resulted in premiums sufficiency indicators in 2016. During 2016, the improvement in operating performance was driven by premium growth in line with improved underwriting practices, an expense optimization scheme and a good evolution of claims that positively impacted the company’s cost structure, thus generating stronger bottom line results. ANA posted a 91.5% combined ratio and ROE of 11.8% in 2016. A.M. Best expects the company to continue its good operating performance, which will ultimately strengthen its capitalization levels.
Key rating drivers that could lead to positive rating actions include continued premiums sufficiency that ultimately leads to a stronger capital position. Key factors that could lead to negative rating action include a sustained deterioration of operating performance that weakens the company’s capital position to levels no longer supportive of the ratings.
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 (Version Sept. 5, 2014)
- Analyzing Insurance Holding Company Liquidity (Version March 25, 2013)
- Catastrophe Analysis in A.M. Best Ratings (Version Nov. 3, 2011)
- Evaluating Country Risk (Version May 2, 2012)
- Insurance Holding Company and Debt Ratings (Version May 6, 2014)
- Rating Members of Insurance Groups (Version Dec. 15, 2014)
- Risk Management and the Rating Process for Insurance Companies (Version April 2, 2013)
- Understanding Universal BCAR (Version April 28, 2016)
View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, please refer to “Understanding Best’s Credit Ratings.”
- Previous Rating Date: Feb 26, 2016
- Date of Financial Data Used: Dec 31, 2016
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