MEXICO CITY--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A- (Excellent), the issuer credit rating of “a-” of Afianzadora Sofimex, S.A. (Sofimex) (Mexico City, Mexico). The outlook for both ratings is stable. Additionally, A.M. Best has assigned a Mexico National Scale Rating of “aa+.MX” with a stable outlook to the company.
The ratings reflect Sofimex’s strong operating performance in terms of profitability and competitiveness within Mexico’s surety bond market, as well as strong risk-adjusted capitalization to support its activities. These positive rating factors are limited by A.M. Best’s view of the highly competitive market in which the company operates and the industry’s slowdown up to the third quarter of during 2015.
As of June 2015, Sofimex’s business portfolio was comprised of administrative sureties (88%), fidelity (6%), credit (4%) and judicial (2%).
Sofimex was able to maintain its profitable operations for 2014 while presenting strong growth above that of the dynamism of the industry during the year. A.M. Best believes the industry will end 2015 with marginal growth. Sofimex does not expect to match last year’s pace of growth but has been able to maintain its profitability levels through June 2015.
Sofimex continued to post adequate loss ratios at a similar level to that of last year. On the other hand, due to changes in its commission system, the company has been able to improve its combined ratio significantly and boost its profitability. Sofimex’s capitalization also remained strong and supportive of its rating even when stressed by possible losses from contingent claims. Furthermore, Sofimex has a solid reinsurance program with highly rated reinsurers.
While the surety markets did not live up to its expectations in 2015, the company has been able to maintain around the same level of business as in 2014, and is expected to present similar results. Furthermore, A.M. Best believes that as Mexico’s fourth largest surety writer and with its good distribution network and disciplined underwriting, Sofimex has sufficient resources to maintain a stable stream of net income to face the current market conditions.
Positive rating actions could occur if the company is able to maintain its current level of acquisition costs and improve its loss ratio, increasing profitability and as a consequence, further strengthen its capital base in support of financial strength. Negative rating actions could occur if underwriting performance deteriorates or if there is a significant increase in business risk or net premium risk.
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
- Evaluating Country Risk
- Rating Surety 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: Dec. 05, 2014
- Date of Financial Data Used: June 30, 2015
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