Best’s News & Research Service - February 17, 2022 02:21 PM (EST)
AM Best Affirms Credit Ratings of Seguros Monterrey New York Life, S.A. de C.V.
- February 17, 2022 02:21 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, neutral 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 slower economic conditions, pressure on interest rates and the pandemic environment, which is creating a shift in demand for certain product types.
SMNYL is the Mexico-based subsidiary of New York Life and a product of the Seguros Monterrey acquisition in 2000. SMNYL, established in Mexico in 1940, mainly underwrites life insurance products through a solid agent network. As of September 2021, SMNYL was Mexico’s fourth-largest insurer, with a market share of 9.1% in the life and health market. The company’s product portfolio is composed of individual life (64%), individual medical expenses (23%), group medical expenses (9%) and group life (4%).
SMNYL benefits from its ultimate parent’s strong brand recognition. In addition, its integration within its 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 2020-2021, as its strategy has been driven by results and efficiencies in costs, allowing it to sustain healthy expansion of its capital position. AM Best expects SMNYL to maintain its trend of positive results, as the company adjusts its commercial efforts in conjunction with emerging opportunities in the individual life segment derived from income tax in traditional investment products, in addition to the repricing and reserve adjustments SMNYL implemented in order to face continuing pandemic-related challenges. 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, as it has demonstrated adjustments to its investment policy that supports the company’s asset-liability matching and reduces credit risk.
Risk-adjusted capitalization is assessed as strongest, supported by the strong net income reported by the company 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 a strong net income and nonmaterial 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 are expected to follow the same trend in 2022. However, adjustments to its investment portfolios are focused on maintaining asset-liability matching within the group’s guidelines.
AM Best considers SMNYL to be well-positioned at its current rating levels, and positive rating actions are not expected in the near term. Negative rating actions could occur if large capital outflows or weaker operating performance due to large and sustained increases in operational and acquisition expenses or benefits paid derived from the expansion strategy impacts the company’s risk-adjusted capitalization 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 July 22, 2021)
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: Jan. 29, 2021
- Date Range of Financial Data Used: Dec. 31, 2015-Dec. 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.
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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.