Best’s News & Research Service - November 01, 2019 03:19 PM (EDT)
AM Best Affirms Credit Ratings of General de Seguros, S.A.B.
- November 01, 2019 03:19 PM (EDT)
Mexico City //BestWire// - AM Best has affirmed the Financial Strength Rating of A- (Excellent), the Long-Term Issuer Credit Rating of “a-”, and the Mexico National Scale Rating (NSR) of “aaa.MX” of General de Seguros, S.A.B. (Genseg) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Genseg’s balance sheet strength, which AM Best categorizes as strongest, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM).
Genseg’s balance sheet strength is supported by risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as the company’s efforts to improve underwriting results and maintain a consistent inflow of investment income, coupled with an experienced management team and solid reinsurance program. The ratings also recognize Genseg’s affiliation and strategic importance to its ultimate parent, Peña Verde, S.A.B., a leading group in Mexico’s (re)insurance industry, which provides synergies and operating efficiencies. Partially offsetting these positive rating factors is the strong competitive landscape in its main business lines.
Genseg initiated operations in Mexico City in 1970. The company mainly underwrites motor, agriculture and life insurance. Genseg operates throughout Mexico with a network of independent agents, brokers and commercial offices.
Genseg’s profitability had relied on investment income historically, but a non-realized loss in the valuation of investments, mainly driven by volatility in Mexico’s stock market, paired with premium insufficiency, resulted in negative bottom line results in 2018. Nonetheless, the company’s results during the first half of 2019 have improved, resulting in positive bottom line results.
The company’s capitalization and liquidity provide Genseg with flexibility in order to cover deviations in claims or volatile securities market conditions without having to realize losses in its investment portfolio. The company’s capitalization is further supported by its reinsurance program with highly rated entities.
During 2018, the company managed to maintain a stable loss ratio through a more prudent underwriting. The company’s combined ratio approached 100% in a now four-year positive trend. AM Best expects Genseg to sustain this trend through year-end 2019, despite challenges arising from a very competitive and maturing market.
Factors that may trigger positive rating actions include stable profitability metrics performing in line with higher rated peers, supported by discipline in underwriting practices coupled with an investment strategy that endures a volatile stock market. The company’s current ratings could come under pressure should soft market conditions continue and if a lack of underwriting discipline generates results and overall profitability that fall short of AM Best’s expectations or if capitalization is no longer supportive of the current ratings.
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:
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- A.M. Best´s Ratings on a National Scale (Version Oct. 13, 2017)
- Evaluating Country Risk (Version Oct. 13, 2017)
- Understanding Universal BCAR (Version May 23, 2019)
- Catastrophe Analysis in A.M. Best’s Ratings (Version Oct. 13, 2017)
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 Understanding Best’s Credit Ratings.
- Previous Rating Date: October 11, 2018
- Date Range of Financial Data Used: January 1, 2014 - June 30, 2019
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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