MEXICO CITY--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating to B++ (Good) from A+ (Superior), the Long-Term Issuer Credit Rating to “bbb+” from “aa-”, and the Mexico National Scale Rating to “aa+.MX” from “aaa.MX” of XL Seguros México, S.A. de C.V. (XLSM) (Mexico). Concurrently, AM Best has placed these Credit Ratings (ratings) under review with negative implications. This rating action follows the announcement that the legal authorization to transfer XLSM’s portfolio to AXA Seguros S.A. de C.V. (AXA) has been requested.
The ratings reflect XLSM’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
Prior to these rating actions, XLSM was a member of XL Bermuda Ltd (XL) and deemed by AM Best to be a strategically important subsidiary. On Aug. 26, 2020, XLSM announced that it has initiated the authorization procedure with Mexico authorities for a portfolio transfer between XLSM and AXA Seguros. Due to this event, AM Best no longer considers XLSM as strategically important, and has removed its group status.
XLSM’s balance sheet strength level of very strong is the result of the company’s risk-adjusted capitalization achieved through the reinvestment of earnings over the years, along with its extensive reinsurance program placed within the XL Group. While facing volatility in premium growth, given the competitive nature of the property/casualty segment, XLSM has remained profitable, supported by reinsurance commissions for its ceding profile. XLSM’s business profile is limited by the remaining underwriting capabilities once the portfolio transfer is complete.
The portfolio transfer remains in an early stage and is still subject to definitive approval by Mexico authorities. The ratings will remain under review with negative implications until AM Best can fully assess the financial position of XLSM after the completion of the transaction.
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