MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has assigned Afianzadora Insurgentes, S.A. de C.V, Grupo Financiero Aserta (Insurgentes) an Insurer Financial Strength (IFS) rating of 'BBB-' and a National Scale IFS rating of 'AA-'. The Rating Outlook for both ratings is Stable.
KEY RATING DRIVERS
Insurgentes is a subsidiary of Grupo Financiero Aserta, S.A. de C.V. (GFAserta), which also owns Afianzadora Aserta, S.A. de C.V. (Aserta) and a life insurance company. Combined, the two surety bond companies represent 98% of GFAserta's total assets, defining the group's overall credit profile. GFAserta is responsible for the losses and liabilities of its subsidiaries, according to its Convenio Unico de Responsabilidades.
Insurgentes is the fifth-largest of a total of 15 companies, boasting a market share of 8.1% as of December 2015. GFAserta's strategy utilizes its subsidiaries' technical advantages by having the surety bond company that generates the greatest benefits for the group underwrite the business. The group's two surety bond companies have a combined market share of 26%.
While the company's leverage metrics are slightly higher than the sector's local and regional averages, Fitch believes that these are adequate, as the pressure on capital is generated by Mexican regulations, which call for ample provisioning.
The company's efficiency levels, measured through its operating (71.6%) and loss ratios (12.4%), have remained stable and competitive as of June '16, although results have been pressured by administrative expenses. Risk cumulus remain high but under control, representing 20% of the capital by surety bond, and 98% by group, although they are mitigated through reinsurance contracts.
With a five-year average of 50%, the proportion of Insurgentes' investments held in government instruments is slightly lower than the sector's 57.9%. The investments backing reserves comprise government instruments (85%) and shares of adequate credit quality (15%).
Insurgentes' reserves over net earned premiums ratio is higher than the local and regional averages, due to the stringent regulatory requirements in Mexico, as well as the company's conservative policy.
Insurgentes' reinsurance program is ample and includes contracts with companies of high credit quality, as 35% of its premiums written are reinsured with its sister company. The risk exposure retained by the company is a high 10.4% for its main product but similar to the regional average for the sector.
An improvement in Insurgentes' rating would be associated with lower leverage ratios and lower equity exposures, along with adequate and ample profitability ratios sustained over time. Furthermore, a downgrade would be triggered by higher leverage ratios and a sustained deterioration in the company's technical profitability. Likewise, an upgrade or downgrade of Insurgentes' ratings would be triggered by a change in Fitch's perception of GFAserta's credit quality, which is driven by the two surety bond companies that make up the group.
Date of Relevant Rating Committee: Sept. 26, 2016
Additional information is available on www.fitchratings.com
Insurance Rating Methodology (pub. 15 Sep 2016)
Dodd-Frank Rating Information Disclosure Form
Copyright (c) 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed.
The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers.
For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.