MEXICO CITY--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of B++ (Good), the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb+” and the Mexico National Scale Rating of “aa+.MX” of Aserta Seguros Vida, S.A. de C.V., Grupo Financiero Aserta (ASV) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect ASV’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The ratings reflect ASV’s integration into Grupo Financiero Aserta, S.A. de C.V. (GFA) in terms of operations, capital support, business infrastructure and ERM. Mitigating these positive factors are the challenges associated with being a newer company and volatility in bottom-line results that are inherent in a recently created life insurer.
ASV started operations in 2012, focusing on life microinsurance, group life and accident and health insurance. In 2013, GFA acquired a majority stake in the company and subsequently received regulatory approval for ASV to become a member of the financial group. As of June 2019, group life insurance business composed 99.49% of the ASV’s business portfolio with accident and health accounting for 0.50%, and individual life for the remaining 0.01%. ASV ranked as the 20th largest insurer in Mexico’s life segment based on gross written premium, with a market share of less than 1%, as of June 2019.
During 2018, ASV registered significant growth, which was in line with its projections, and adhered to the measures adopted by the company in 2017 to improve its underwriting quality. The company was able to maintain a stable loss ratio, and achieved premium sufficiency. Growth allowed the company to mitigate administrative expenses, driving a positive bottom line result of MXN 10.8 million.
As of June 2019, ASV has achieved 50% of its projected growth, and estimates to close 2019 with a combined ratio similar to that of 2018. The company plans to stabilize growth for the coming years.
Risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remains at the strongest level, reflecting the capital support from its parent. The last capital contribution took place in 2017, in order to offset the net loss. In 2018, there were no capital contributions nor dividend payouts; the latter, coupled with positive bottom line results, allowed the company’s capital to grow.
Going forward, AM Best expects ASV to stabilize its results and underwriting in the medium term and to keep expanding its distribution network to achieve a larger scale. Positive rating actions may occur if the company is able to improve its operating performance and capitalization while achieving a larger scale of business. Negative rating actions could occur if GFA’s support diminishes in AM Best’s view or if operating performance deteriorates and capital erodes significantly.
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