MEXICO CITY--(BUSINESS WIRE)--AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of B+ (Good), the Long-Term Issuer Credit Rating of “bbb-” and the Mexico National Scale Rating of “aa-.MX” of Insignia Life S.A. de C.V. (Insignia) (Mexico).
The Credit Ratings (ratings) reflect Insignia’s balance sheet strength, which AM Best categorizes as adequate, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The revised outlooks to positive from stable reflect a substantial capital injection received from its holding company, Proyecto Insignia, S.A.P.I. de C.V. Therefore, Insignia’s risk-adjusted capitalization, as measured by Best Capital Adequacy Ratio (BCAR), strengthened in 2019 as a result of this capital infusion and was enhanced further by the reinvestment of earnings. The previous pressure on capitalization in 2018, derived from the company’s investment in systems, decreased in 2019 as the volume of intangible assets was reduced significantly in proportion to Insignia’s capital base, again partially due to the capital infusion.
The ratings also consider sound underwriting practices, a highly experienced management team and ongoing improvements in ERM. Offsetting these positive rating factors is the company’s relatively small size within Mexico’s life insurance industry.
Insignia initiated operations in Mexico in 2008. The company underwrites individual and group life insurance. Insignia operates through a commercial network of more than 3,000 agents and 10 offices distributed throughout Mexico.
The improvement in Insignia’s risk-adjusted capitalization, as measured by BCAR, reflects shareholder commitment to the company’s growth strategy providing capital support whenever required. In previous years, Insignia’s holding company carried several capital infusions to the company, allowing it to face challenges and pressures that had befallen the company throughout its history. AM Best expects Insignia to maintain improvements in risk-adjusted capitalization, through reinvestment of earnings, proper management of future investments and consistent profitability.
The company’s investment strategy continues to be conservative and provides a steady flow of revenues to back its operating results. Underwriting practices continue to be characterized by positive bottom-line results in 2019, and are in line with its industry peers. Furthermore, Insignia´s return on assets of 2.3% reflects continued profitability and an increasing asset base.
AM Best expects Insignia to strengthen its ERM framework through ongoing improvements involving systems updates and an internal economic capital model.
Key factors that could lead to positive rating actions for Insignia include sustained improvement in risk-based capital, good underwriting results that translate into sound profitability ratios and a reduction of its dependence on capital injections by its holding company. Key factors that could lead to negative rating actions include substantial deterioration in capitalization, as measured by BCAR, in a short period of time, or diminished capital support from its holding company, as well as deviations from AM Best’s expectation of the company’s improving operating performance.
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