MEXICO CITY--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of “a-” of Afianzadora Sofimex, S.A. (Sofimex) (Mexico City, Mexico). The outlook for both ratings is stable.
The ratings are based on the solid performance of Sofimex in terms of profitability, balance sheet strength, good competitive position within the contract and surety bond market in Mexico and positive expectations for premium growth.
These positive rating factors are limited by A.M. Best’s view of the highly competitive market in which the company operates, the increase in claims present during 2013 and the uncertainty regarding price competition as the surety market expands in 2015 based on A.M. Best’s expectation of increased public expenditures.
As a result of higher claims, net income during 2013 saw a reduction in comparison with 2012. This should not be a forward-looking concern as management efforts are directed toward claim control and collections. Sofimex’s capitalization also remained strong, even with higher than previous years’ dividend payments and no significant drags. Furthermore, Sofimex has a solid reinsurance program with highly rated reinsurers.
While the surety markets are expected to expand during 2015, this positive trend might be mitigated by soft market conditions derived from a very competitive environment. Nevertheless, A.M. Best believes that Sofimex, being the fourth largest surety writer in Mexico and with a good distribution network, has sufficient resources to maintain its current performance.
Positive rating actions could occur if the company is able to expand its retention capacity while consistently improving its profitability indicators and maintaining the strength of its capital base. Negative rating actions could occur if underwriting performance deteriorates and capitalization as measured by Best’s Capital Adequacy Ratio falls to levels not supportive of the current 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:
- Evaluating Country Risk
- Rating Surety Companies
- Risk Management and the Rating Process for Insurance Companies
- Understanding Universal BCAR
Click here for 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: Oct. 11, 2013
- Date of Financial Data Used: Sept. 30, 2014
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