AM Best Revises Outlooks to Negative for Quálitas Compañía de Seguros S.A. de C.V.

MEXICO CITY--(BUSINESS WIRE)--AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of B+ (Good), the Long-Term Issuer Credit Rating of “bbb-” (Good) and the Mexico National Scale Rating of “aa-.MX” (Superior) of Quálitas Compañía de Seguros S.A. de C.V. (Quálitas) (Mexico City, Mexico).

The Credit Ratings (ratings) reflect Quálitas’ balance sheet strength, which AM Best assesses as adequate, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

The revised outlooks to negative from stable reflect pressure on Quálitas’ balance sheet strength assessment driven by considerable dividend payments that limit organic capital growth, and a rising trend in underwriting leverage.

Quálitas’ risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), deteriorated to weak from adequate in 2024, putting pressure on the company’s balance sheet assessment. Despite excellent profitability and sustained premium sufficiency, organic capital growth is limited by dividends.

Quálitas has established a strong distribution capability across Mexico through its network of local agents, financial institutions and service offices. This has enabled the company to maintain its leading market position in Mexico’s auto insurance segment and achieve a market share of 32.9% in a highly competitive market. Quálitas differentiates from its competitors in the auto insurance sector through strong name-brand recognition and its ability to adjust pricing and fees successfully.

While Quálitas’ policyholder surplus has increased over time due to its sound net results, the company’s risk-adjusted capitalization is susceptible to variations driven by significant dividend payments. AM Best will continue to monitor the effects on the company’s balance sheet. At the same time, the company’s risk profile, in addition to the short tenor of its investments and a proper matching in currencies, affords Quálitas financial flexibility to react in the best interest of its capital position.

The strong assessment of Quálitas’ operating performance is supported by its capacity to maintain premium sufficiency levels over the past six years. Quálitas’ claim management and market presence, in addition with controlled administrative expenses and underwriting, provide the company with the necessary tools to maintain a profitable profile.

Negative rating actions could take place should Quálitas’ risk-adjusted capitalization fail to improve respect current levels, due to capital outflows or continuing of the rising trend in the company’s underwriting leverage. Positive rating actions could take place if the company is able to reverse the currently negative trend in risk-adjusted capitalization, supported by profitable results.

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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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