Best’s News & Research Service - February 24, 2023 12:31 PM (EST)
AM Best Affirms Credit Ratings of Seguros Monterrey New York Life, S.A. de C.V.
- February 24, 2023 12:31 PM (EST)
Mexico City //BestWire// - AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior), the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa+” (Superior) and the Mexico National Scale Rating of “aaa.MX” (Exceptional) of Seguros Monterrey New York Life, S.A. de C.V. (SMNYL) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect SMNYL’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
The ratings also reflect SMNYL’s strong integration with its parent company, New York Life Insurance Company (New York Life), which has an FSR of A++ (Superior) and a Long-Term ICR of “aaa” (Exceptional), risk-adjusted capitalization assessed at the strongest level, robust ERM, sound operating performance and a highly competitive position in Mexico’s life insurance segment. Partially offsetting these positive rating factors are the company’s challenging expansion strategy within Mexico’s very competitive market amid economic conditions characterized by high inflation and the prevailing high interest rate environment.
SMNYL is the Mexico-based subsidiary of New York Life following its acquisition of Seguros Monterrey in 2000. SMNYL, established in Mexico in 1940, mainly underwrites life insurance products through a solid agent network. As of September 2022, SMNYL was Mexico’s fourth-largest insurer, with a market share of 10.7% in the country’s life and health segment. The company’s product portfolio is composed of individual life (63%), individual medical expenses (22%), group medical expenses (10%) and group life (4%).
SMNYL benefits from its ultimate parent’s strong brand recognition. In addition, SMNYL’s integration within the group is key to the rating levels, as New York Life actively supervises SMNYL’s strategy and operations, further enhancing its corporate governance and product innovation. Within New York Life’s international structure, the Mexico operation stands out as one of the most significant in terms of its good profitability and market presence, which makes the subsidiary’s operation and strategy very likely to be supported by the group if required.
The company grew profitably in 2021-2022, with its strategy driven by results and cost efficiencies, allowing it to sustain a healthy capital position. AM Best expects SMNYL to maintain its trend of positive results, as the company benefits from a material decrease in Covid-related expenses and improved investment yields given the high interest rate environment, and adjusts its commercial efforts in conjunction with emerging opportunities in the challenging individual life segment. Due to the company’s robust ERM and corporate governance capabilities, AM Best believes that SMNYL has sufficient technical tools and market expertise to achieve an adequate balance between growth and profitability. The company has adjusted its investment portfolio to support its asset-liability matching and reduce credit risk.
SMNYL’s risk-adjusted capitalization is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), and supported by reported strong net income, despite dividend payments that did not materially affect AM Best’s view of the company’s risk-adjusted capitalization. AM Best expects that SMNYL’s capital management capabilities will continue to benefit base capital through strong net income and immaterial dividend payments. Due to the nature of the life insurance business and its investment components, SMNYL is susceptible to changes in interest rates, which started to increase in 2021 and followed in 2022. However, adjustments to the company’s investment portfolios are focused on maintaining credit quality and asset-liability matching within the group’s guidelines.
AM Best considers SMNYL to be well-positioned at its current rating level, and positive rating actions are not expected in the near term. Negative rating actions could occur if large capital outflows occur or operating performance weakens and impacts the company’s balance sheet strength in the medium term. Furthermore, negative rating actions could result if AM Best’s view on the strategic importance of the Mexico-based subsidiary to its group decreases or if there are negative rating actions on New York Life.
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:
- AM Best’s Ratings On a National Scale (Version Oct. 13, 2017)
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- Evaluating Country Risk (Version Oct. 13, 2017)
- Scoring and Assessing Innovation (Version March 5, 2020)
- Understanding Global BCAR (Version June 30, 2022)
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.
- Previous Rating Date: Feb. 17, 2022
- Date Range of Financial Data Used: Dec. 31, 2016-Dec. 31, 2022
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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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.