OCTOBER 16, 2020 09:00 AM (EDT)
AM Best Affirms Credit Ratings of HDI Global Seguros, S.A.
FOR IMMEDIATE RELEASE
MEXICO CITY - OCTOBER 16, 2020 09:00 AM (EDT)
The ratings reflect HDI-GS’ balance sheet strength, which AM Best categorizes 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+”. 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.
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. As of December 2019, HDI-GS’ business portfolio was comprised of fire (51.3%), liability (21.4%), marine (24.4%) and engineering risks (2.9%). HDI-GS’ business model utilizes a very low premium retention level, standing at 0.5% at year-end 2019, which is supported completely by an automatic facultative reinsurance agreement provided by its affiliate and minority shareholder, HDI Global Network AG.
HDI-GS’s risk-adjusted capitalization stands at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), with an upward trend in capital and surplus growth 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 2020, 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’s profitability has been further strengthened by investment income, which has increased based on HDI-GS’ long position in U.S. dollars.
If there are positive rating actions on the main operating subsidiaries of HDI/Talanx group as a result of sustained improvements in the group’s balance sheet strength fundamentals, as well as sustained positive developments in underwriting performance across the group’s core business segments, such as in the industrial lines and retail Germany divisions, HDI-GS will move in tandem. Likewise, if there are negative rating actions on HDI V.a.G. derived from weakening in risk-adjusted capitalization below the level required for the strongest BCAR assessment, or if operating performance deteriorates to a level outside of AM Best’s expectations, 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 on the Mexico subsidiary will mirror those actions.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of AM Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, please refer to Guide to Best’s Credit Ratings.
This press release relates to rating(s) that have been published on AM Best’s website. For additional 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.
AM Best does not validate or certify the information provided by the client in order to issue a credit rating.
While the information obtained from the material source(s) is believed to be reliable, its accuracy is not guaranteed. AM Best does not audit the company’s financial records or statements, or otherwise independently verify the accuracy and reliability of the information; therefore, AM Best cannot attest as to the accuracy of the information provided.
AM Best’s credit ratings are independent and objective opinions, not statements of fact. AM Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. AM Best’s credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions. View our entire notice for complete details.
AM Best receives compensation for interactive rating services provided to organizations that it rates. AM Best may also receive compensation from rated entities for non-rating related services or products offered by AM Best. AM Best does not offer consulting or advisory services. For more information regarding AM Best’s rating process, including handling of confidential (non-public) information, independence, and avoidance of conflicts of interest, please read the AM Best Code of Conduct. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.