MEXICO CITY--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent), the Long-Term Issuer Credit Rating of “a-” (Excellent) and the Mexico National Scale Rating of “aaa.MX” (Exceptional) of General de Salud, Compañía de Seguros, S.A. (Gsalud) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Gsalud’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
Gsalud’s balance sheet strength is supported by risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), along with strong underwriting practices. The ratings also recognize Gsalud’s affiliation and strategic importance to its ultimate parent, Peña Verde, S.A.B., the leading group in Mexico’s insurance and reinsurance industries, which provides synergies and operating efficiencies. Offsetting these positive rating factors is Gsalud’s concentration in a single line of business in Mexico’s highly competitive health insurance market.
Gsalud is a fully owned subsidiary of General de Seguros, S.A.B. (Genseg) and is focused solely on health insurance. The company provides products mainly in the individual and collective health segments, as well as for major medical expenses. Gsalud has used the same distribution channels as Genseg, which involves agents, brokers and commercial offices.
Gsalud’s strongest level of risk-adjusted capitalization has been maintained despite an increased risk appetite, as reflected by a higher exposure to shares, which makes the company susceptible to equity risk. Historically, the company’s strong underwriting practices have resulted in positive technical performance with no dependence on investment revenue to achieve positive bottom line results. In 2020, Gsalud’s underwriting practices, coupled with investments results, sustained profitability, as reflected in its 14% return on equity. As of June 2021, COVID-19 related claims have impacted loss ratios; however, the company expects to close the year with profitable results, still underpinned by premium sufficiency, protected by the company’s excess of loss contracts.
The company benefits from being integrated into the Peña Verde, S.A.B. group, gaining operational advantage through common systems, procedures and ERM practices.
Gsalud is undergoing a comprehensive transformation project, which includes the implementation of a new core system, pricing and risk-assessment tools, digital platforms and products for agents and policyholders, as part of its strategy to strengthen its underwriting practices and increase its market scope.
The stable outlook reflects the company’s ability to maintain its risk-adjusted capitalization and balance sheet strength assessment while contributing to its group strategies and initiatives, supported by its profitable underwriting, despite the challenges that health insurance has faced since the pandemic started.
The company’s ratings could come under pressure if risk-adjusted capitalization weakens as a result of extensive capital outflows or a lack of underwriting discipline that generates negative technical results, causing the capital base to erode to a level no longer supportive of the current ratings. Negative rating actions also could take place if the support provided by its group, Peña Verde, S.A.B., weakens in AM Best’s view.
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