MEXICO CITY--(BUSINESS WIRE)--An increasing volume of shareholder dividends is the main driver behind a reduction in the overall capitalization of Mexico’s insurance industry, according to a new Best’s Special Report.
The report, titled "Dividends Affecting Capitalization Levels in Mexico’s Insurance Market," is based on an A.M. Best analysis of Mexico’s 103 insurance companies, with the exception of nine pension and annuity companies that held a 5% market share as of March 2014. The results showed a negative trend in terms of capitalization for the industry over the past five years. Even though the competitive environment has pressured underwriting results, and the low interest rate environment has negatively affected the industry’s revenues, the industry’s profitability remains strong and fairly stable for respective market segments. As a result, the industry’s profitability is not considered a driver for the deterioration in capitalization.
The analysis was done in advance of Mexico’s insurance sector moving toward a new Solvency II-type regulatory scheme, which will be implemented in April 2015. “The new regulatory capitalization requirements, while challenging, should not pose a threat to any of the current participants,” said Alfonso Novelo, director of analysis for A.M. Best América Latina, S.A. de C.V. However, Novelo noted that there might be room for merger and acquisition activity, especially in the case of companies that are concentrated by line of business.
For the full, complimentary copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=227621.
To watch a video interview with Alfonso Novelo, please visit: http://www.ambest.com/v.asp?v=fmmexico814.
This report originally appeared in Best's Journal, dated August 4, 2014. Best's Journal is a biweekly publication that presents A.M. Best's original research, analysis and commentary on the global insurance industry, and is available exclusively as part of a subscription to the Best's Insurance News & Analysis service. More information about the Best's Insurance News & Analysis subscription service is available at www.ambest.com/sales/bina/default.asp. To order, contact Customer Service at +(1) (908) 439 2200, ext. 5742 or at (800) 424-2378 when calling from the United States and Canada.
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