SEPTEMBER 14, 2022 04:01 PM (EDT)
AM Best Affirms Credit Ratings of Stewart Title Guaranty de México, S.A. de C.V.
|Inger Rodríguez |
Associate Financial Analyst
+52 55 1102 2720, ext. 108
Associate Director, Analytics
+52 55 1102 2720, ext. 122
Manager, Public Relations
+1 908 439 2200, ext. 5159
Managing Director, Strategy & Communications
+1 908 439 2200, ext. 5204
FOR IMMEDIATE RELEASE
MEXICO CITY - SEPTEMBER 14, 2022 04:01 PM (EDT)
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 Stewart Title Guaranty de México, S.A. de C.V. (STGM) (Mexico). The outlook of these Credit Ratings (ratings) is stable.
STGM is a member of Stewart Title Group, which on a consolidated basis has a balance sheet strength that AM Best assesses as very strong, as well as adequate operating performance, a neutral business profile and appropriate enterprise risk management.
The ratings also reflect the integration of this Mexico subsidiary to its parent company, Stewart Title Guaranty Company (STGC), and to the group in terms of the business model and operational support. Offsetting these positive rating factors are the company’s small market share in Mexico’s insurance industry and its concentration in a single line of business.
STGM is a subsidiary of STGC, located in Houston, Texas, which, in addition to Mexico, also offers products through its subsidiaries to markets in the United States, the European Union, Australia, Costa Rica and China. Given the specialized nature of the title product and the institutional strategy, STGM’s sales efforts focus on business referred by the parent company on existing customers, which generates a limited number of policies per year.
STGM’s risk-adjusted capitalization stands at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), with the company’s performance showing an upward trend in capital and surplus growth, mainly driven by consistent positive bottom-line results, with investment and underwriting risks being the main components for required capital. Support from STGC in the past has come through capital injections, with the most-recent one in 2012, directed to help strengthen the business when required.
The company was able to regain premium volume during 2021, propelled by the reopening of public registries and notary offices, a core component for underwriting. STGM’s flexible cost structure continues to provide significant advantages to the company, allowing it to optimize expenses and achieve positive bottom-line results through investment income.
For 2022 and going forward, STGM expects premium volume to return to pre-pandemic levels as normal underwriting operations are fully reinstated, supported by its referred business system.
Positive rating actions taken on the main operating subsidiaries of Stewart Title Group that result from positive underwriting performance trends, accompanied by growth in risk-adjusted capitalization, will prompt the ratings of STGM to move in tandem. Conversely, negative rating actions taken on Stewart Title Group due to a significant deterioration in operating performance that results in a decline in its risk-adjusted capitalization levels, or if the holding company experiences liquidity issues, or a significant increase in leverage, will prompt the ratings of STGM to move in tandem. Negative rating action could also occur if challenges from rising interest rates and a slowing economy pose a significant decline in operating profitability or a material decline in risk-adjusted capitalization levels, which also will result in rating downgrades for the Mexico subsidiary.
The methodology used in determining these ratings is Best’s Credit Rating Methodology (Version Nov. 13, 2020), 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.
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