Best’s News & Research Service - November 12, 2021 10:53 AM (EST)
AM Best Revises Outlooks to Positive for HDI Global Seguros, S.A.
- November 12, 2021 10:53 AM (EST)
Mexico City //BestWire// - AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a+” (Excellent ) of HDI Global Seguros, S.A. (HDI-GS) (Mexico). Concurrently, AM Best has affirmed the Mexico National Scale Rating of “aaa.MX” (Exceptional) of HDI-GS. The outlook of this Credit Rating (rating) is stable.
The ratings reflect HDI-GS’ balance sheet strength, which AM Best assesses 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+” (Excellent). 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.
The revision of HDI-GS’ outlooks to positive reflects AM Best’s expectation that HDI-V.a.G.’s prudent risk culture and strong and stable operating performance, supported by improved profitability of its primary business segment, will further enhance the resilience of HDI-GS’ balance sheet.
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. HDI-GS’ business portfolio is composed of fire, liability, marine and engineering risks. HDI-GS’ business model utilizes a very low premium retention level, standing at 0.11% at year-end 2020, which is supported completely by an automatic facultative reinsurance agreement provided by its affiliate and minority shareholder, HDI Global Network AG.
HDI-GS’ risk-adjusted capitalization stands at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), with growth in capital and surplus 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 2021, 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 has been able to sustain profitability though underwriting while taking advantage of investment income without being overly reliant on it.
If there are positive rating actions on the main operating subsidiaries of HDI-Talanx group following demonstrated resilience of the balance sheet due to the group’s prudent risk culture, underpinned by strong and stable operating performance across business segments, HDI-GS’ ratings would move in tandem. Likewise, if there are negative rating actions on HDI V.a.G., as a result of operating performance deteriorating below the level required for the strong assessment, 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 of the Mexico subsidiary would mirror those actions.
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:
- Evaluating Country Risk (Version, Oct. 13, 2017)
- Understanding Global BCAR (Version, July 22, 2021)
- Catastrophe Analysis in AM Best Ratings (Version, Oct. 13, 2017)
- Available Capital & Holding Company Analysis (Version, Oct. 13, 2017)
- AM Best’s Ratings On a National Scale (Version, Oct. 13, 2017)
- Scoring and Assessing Innovation (Version, March 5, 2020)
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: Oct. 16, 2020
- Date Range of Financial Data Used: Dec. 31, 2014-July 31, 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.
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 use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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.