Best’s News & Research Service - August 12, 2021 12:26 PM (EDT)
AM Best Affirms Credit Ratings of Stewart Title Guaranty de México, S.A. de C.V.
- August 12, 2021 12:26 PM (EDT)
Mexico City //BestWire// - 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 the local 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 reduced 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 an upward trend in capital and surplus growth during the past five years, 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.
Premium growth in 2020 was limited by the closing of public registries and notary offices due to COVID-19, preventing investigation on new business, a core process for underwriting. During an unprecedented year for title insurance operations, STGM’s flexible costs structure provided significant advantages to the company, allowing it to optimize expenses and achieve positive bottom-line results through investment income.
For 2021 and going forward, STGM expects to regain usual underwriting operations once public offices reopen, 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 group experiences liquidity issues, or a significant increase in leverage, also will result in rating downgrades for the Mexico subsidiary.
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:
- Rating Title Insurance Companies (Version July 31, 2020)
- AM Best’s Ratings On a National Scale (Version Oct. 13, 2017)
- Scoring and Assessing Innovation (Version March 5, 2020)
- Evaluating Country Risk (Version Oct. 13, 2017)
- Available Capital & Holding Company Analysis (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 Guide to Best’s Credit Ratings.
- Previous Rating Date: Sept. 23, 2020
- Date Range of Financial Data Used: Dec. 31, 2015-June 30, 2021
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.