MEXICO CITY--(BUSINESS WIRE)--AM 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 Tokio Marine HCC Mexico Compañía Afianzadora, S.A. de C.V. (TMHCC Mexico) (Mexico City, Mexico). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect TMHCC Mexico’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The ratings also reflect TMHCC Mexico’s affiliation with its parent company, Houston Casualty Company (HC), in terms of reinsurance protection, ERM and capital commitments. Limiting the ratings is the inherent risk of a start-up company implementing its business plan, and the potential volatility of Mexico’s economy.
TMHCC Mexico is the Mexican surety subsidiary of HC; the company received regulatory approval for operations in April 2019 and issued its first policy in July 2019. HC and TMHCC Mexico also have a sister company, Tokio Marine Compañía de Seguros, S.A. de C.V. (TMX), which is domiciled in Mexico. TMHCC Mexico will take advantage of TMX’s corporate structure, which will provide additional support to the operation.
The company plans to develop its presence in Mexico through a predominant mix of mostly construction and commercial administrative surety, strongly backed by a comprehensive reinsurance program largely placed with its parent company.
TMHCC Mexico’s very strong balance sheet assessment is derived from its strong capital position in support of its premium growth during its first five years of operation, which is strengthened further by the reinsurance contract predominantly placed with its parent company.
The adequate assessment of TMHCC Mexico’s operating performance reflects its seasoned management and underwriting team, with a successful track record, and the operational leverage the company gains from being integrated into the Tokio Marine Group. However, due to the start-up nature of the company, business plan implementation has to evolve for AM Best to evaluate the company’s operating performance adequately.
As of July 2019, the economic environment for the surety market has remained slow. These conditions could continue amid possible economic volatility, which potentially could limit the growth prospects of the company.
Positive rating actions could take place if the company is able to achieve its commercial goals while posting sound operating performance and maintaining its current risk-adjusted capitalization. Negative rating actions could take place if the company experiences a deterioration of its risk-adjusted capitalization, either by weak operating performance, or by any capital outflows, or if AM Best determines that the strategic importance of the Mexican subsidiary to the Tokio Marine group has decreased.
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