AM Best Revises Outlooks to Positive for HDI Global Seguros, S.A.

MEXICO CITY--(BUSINESS WIRE)--AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a+” (Excellent ) of HDI Global Seguros, S.A. (HDI-GS) (Mexico). Concurrently, AM Best has affirmed the Mexico National Scale Rating of “aaa.MX” (Exceptional) of HDI-GS. The outlook of this Credit Rating (rating) is stable.

The ratings reflect HDI-GS’ balance sheet strength, which AM Best assesses 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+” (Excellent). 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.

The revision of HDI-GS’ outlooks to positive reflects AM Best’s expectation that HDI-V.a.G.’s prudent risk culture and strong and stable operating performance, supported by improved profitability of its primary business segment, will further enhance the resilience of HDI-GS’ balance sheet.

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. HDI-GS’ business portfolio is composed of fire, liability, marine and engineering risks. HDI-GS’ business model utilizes a very low premium retention level, standing at 0.11% at year-end 2020, which is supported completely by an automatic facultative reinsurance agreement provided by its affiliate and minority shareholder, HDI Global Network AG.

HDI-GS’ risk-adjusted capitalization stands at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), with growth in capital and surplus during the past five years, mainly driven by consistent positive bottom-line results. Given the company’s ceding profile, credit risk continues to be the main driver for required capital; however, 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. Support from the group in the past has come through capital injections, with the most-recent one in 2015, aimed to support growth and maintain adequate reserves and capital sufficiency.

Reinsurance commissions continue to impact acquisition costs positively, given that HDI-GS’ extensive reinsurance program is placed with its affiliate, HDI Global Network AG, and continues to be a mainstay for profitability. As of July 2021, HDI-GS has been able to maintain a stable cash flow and propel premium growth, despite the challenges posed by the COVID-19 pandemic. The company has been able to sustain profitability though underwriting while taking advantage of investment income without being overly reliant on it.

If there are positive rating actions on the main operating subsidiaries of HDI-Talanx group following demonstrated resilience of the balance sheet due to the group’s prudent risk culture, underpinned by strong and stable operating performance across business segments, HDI-GS’ ratings would move in tandem. Likewise, if there are negative rating actions on HDI V.a.G., as a result of operating performance deteriorating below the level required for the strong assessment, due to factors such as unexpectedly high losses or marked deterioration in underwriting risk controls, resulting in a sustained decline in technical results, the ratings of the Mexico subsidiary would 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 Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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