MEXICO CITY--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent), the Long-Term Issuer Credit Rating (Long-Term ICR) of “a+” and the Mexico National Scale Rating of “aaa.MX” of HDI Global Seguros, S.A. (HDI-GS) (Mexico). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect HDI-GS’ balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management.
The ratings also reflect HDI-GS’ substantial reinsurance support from its group through HDI Global Network AG, which currently has an FSR of A (Excellent) and a Long-Term ICR of “a+”. Additionally, the ratings factor in HDI-GS’ integration within its ultimate parent company, HDI Haftpflichtverband der Deutschen Industrie V.a.G. (HDI V.a.G.), in terms of the business model and consistent financial support.
HDI-GS is a subsidiary of HDI Global Insurance Company (99.9%) and HDI Global Network AG (0.1%), which are both subsidiaries of HDI V.a.G. As of December 2018, the company’s business portfolio was distributed across fire (52%), liabilities (26%), marine (16%) and engineering risks (6%). HDI-GS’ business model consists of a very low premium retention level, standing at 0.5% at year-end 2018, which is supported completely by an automatic facultative reinsurance agreement provided by its affiliate and minority shareholder, HDI Global Network AG.
The company’s risk-adjusted capitalization is strong, as measured by Best’s Capital Adequacy Ratio (BCAR), and has benefited from several capital contributions from the group, aimed to support its growth and to maintain adequate reserves and capital sufficiency. The last capital contribution occurred in 2015.
HDI-GS’ exposure to underwriting risks is limited through its reinsurance agreement with HDI Global Network AG, which also renders lower levels of required capital. However, large recoverables from reinsurance are reflected in the assessment of its credit risk. AM Best does not view this as a major concern given the counterparty’s excellent level of security and the binding characteristics of the contract toward HDI-GS’ obligations.
In 2018, the company reported an improved loss ratio as a result of lower net claims. Based on the company profit-after-tax over average assets, and profit-after-tax over average capital and surplus, HDI-GS return on assets and return on equity also showed improvement, standing at 1.7% and 12.4%, respectively.
AM Best expects HDI-GS’ performance to remain stable with the support provided by HDI V.a.G. and the binding characteristics of its reinsurance contract.
If there are positive rating actions on the main operating subsidiaries of HDI/Talanx group as a result of improvements in the balance sheet strength fundamentals, as well as sustained positive developments in underwriting performance across core business segments, such as in the industrial lines and retail Germany divisions, HDI-GS will move in tandem. Likewise, if there are negative rating actions on HDI V.a.G. because of unexpectedly high losses or marked deterioration in operating performance or risk-adjusted capitalization, as well as in underwriting risk controls resulting in a sustained decline in technical results, the ratings on the Mexico subsidiary will mirror those actions.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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