AM Best has affirmed the Financial Strength Rating of A- (Excellent), the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” and the Mexico National Scale Rating of “aaa.MX” of Assurant Daños México, S.A. (ADM) and Assurant Vida México, S.A. (AVM). The outlook of these Credit Ratings (ratings) is stable. Both companies are domiciled in Mexico City, Mexico.
The ratings reflect ADM’s and AVM’s balance sheet strength, which AM Best assesses as strong, as well as each company’s adequate operating performance, limited business profile and appropriate enterprise risk management.
The ratings reflect balance sheet strength consistently maintained at strong levels. The ratings of ADM and AVM also reflect their affiliation and strategic importance to Assurant, Inc., the ultimate parent, as a stepping stone to grow in the Latin America market, as well as their respective risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The ratings also consider the solid reinsurance structure mainly supported by the group. Partially offsetting these positive rating factors are the small market share of both companies and the possibility of increasing competition within their niche markets.
ADM and AVM initiated operations in 2004 and are owned by Assurant Holding Mexico, S. de R.L. de C.V., which is part of Assurant, Inc. Distribution for both companies is based on sales through financial institutions, auto companies, telecom carriers, retailers and other channels.
ADM and AVM follow their group’s underwriting, ERM and corporate governance practices, receive reinsurance support and benefit from its brand recognition in order to expand their market share in Mexico. Both subsidiaries also benefit from their group’s capital contributions, when required, in support of growth targets.
In 2019 and 2020, ADM maintained its balance sheet strength at strong levels, despite a dividend payment carried over in 2019. Premium growth during 2020 faced pressure derived from the closure of retail stores and malls due to quarantine measures; however, underwriting results improved due to a reduction of management expenses. ADM has been able to maintain profitability as of November 2020 through positive technical results, backed up by investment income.
For 2019 and 2020, AVM’s balance sheet strength was at a strong level, mainly supported by positive bottom-line results. AVM’s premium growth also was affected in 2020, which when coupled with the company’s high levels of ceded premiums, pressured underwriting results. AVM exhibited positive bottom-line results as of November 2020, backed predominantly by investment income.
Factors that could lead to positive rating actions for ADM include improvements in operating performance that can translate into a visible upward trend of premium sufficiency while maintaining risk-adjusted capitalization metrics at the strongest level. Conversely, negative rating actions could take place if operating performance substantially deteriorated or if an aggressive growth in premiums leads to a drop in risk-adjusted capitalization to a level no longer supportive of the current ratings.
Positive rating factors that could lead to an upgrade for AVM’s ratings are sustained improvements in underwriting results that continue to strengthen its capital base and reduce its dependence on capital support from its group. Negative rating factors that could result in a downgrade include material deterioration in underwriting performance that results in a decline in risk-adjusted capitalization.
Negative rating actions also would occur if the subsidiaries’ parental support or their strategic importance to the group deteriorates in AM Best’s view.
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