MEXICO CITY--(BUSINESS WIRE)--A.M. Best has assigned a Financial Strength Rating of A (Excellent), a Long-Term Issuer Credit Rating of “a” and a Mexico National Scale Rating of “aaa.MX” to MAPFRE MÉXICO, S.A. (MM) (Mexico City, Mexico). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings of MM recognize its affiliation with its immediate parent, MAPFRE INTERNACIONAL, S.A., as well as the synergies and operating efficiencies derived from being a group member of MAPFRE S.A., the leading insurer in Spain.
MM’s ratings reflect its solid risk-adjusted capitalization, its competitive position in Mexico’s insurance industry and adequate enterprise risk management (ERM) practices. Offsetting these positive rating factors is the deterioration in MM’s operating performance in 2016, stemming from its previous strategy to expand its market share.
MM operates as a composite insurer of life and non-life business and ranks among Mexico’s five-largest insurers based on written premiums.
MM’s written premiums diminished in 2016, given the large increase in the previous year from underwriting of the biannual property-liabilities policy of Petróleos Mexicanos (PEMEX), a state-owned oil and gas company. As of year-end 2016, MAPFRE Tepeyac, S.A. (MM’s former name) generated net income despite deterioration in its operating performance, mainly driven by the release of catastrophe and technical reserves derived from the adoption of Solvency II-type standards in Mexico and good financial products. Efforts made by the company to improve its loss and administrative expense ratios did not materialize favorably in 2016; however, as of September 2017, the company has improved its operating performance. The company in 2017 renewed the PEMEX policy for USD 546.3 million.
The company’s risk-adjusted capitalization is supportive of the current ratings. In 2016, net required capital decreased in a steeper manner than policyholders’ surplus. This was the result of diminished asset base caused by the implementation of market valuation of investments and capital benefiting from the positive net income without dividend payments. In the medium term, A.M. Best expects changes in underwriting strategy to be reflected in better net results and therefore in a more robust capital base that could give way to a stronger risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR).
ERM practices are well-established and implemented throughout the company and closely follow those set by MAPFRE S.A. This integration has benefited the company’s implementation of Mexico’s new Solvency II-type regulations.
Positive rating actions on its ultimate parent, MAPFRE S.A., also could result in positive rating actions on MM. Factors that may lead to negative rating actions include significant and sustained deterioration of its underwriting quality in subsequent years, which could significantly weaken its capitalization. In addition, negative rating actions for its ultimate parent would result in a downward movement of MM’s 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 (Version Oct. 13, 2017)
- Understanding Universal BCAR (Version Oct. 13, 2017)
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- A.M. Best Ratings on National Scale (Version Oct. 13, 2017)
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: Sept. 21, 2017 (Ratings affirmed, then withdrawn)
- Date of Financial Data Used: Sept. 30, 2017
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