Best’s News & Research Service - December 08, 2023 01:59 PM (EST)
AM Best Revises Outlooks to Negative; Affirms Credit Ratings of General de Salud, Compañía de Seguros, S.A.
- December 08, 2023 01:59 PM (EST)
Mexico City //BestWire// - AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent), the Long-Term Issuer Credit Rating of “a-” (Excellent) and the Mexico National Scale Rating (NSR) of “aaa.MX” (Exceptional) of General de Salud, Compañía de Seguros, S.A. (Gsalud) (Mexico City, Mexico).
The Credit Ratings (ratings) reflect Gsalud’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
Gsalud’s balance sheet strength is supported by its risk-adjusted capitalization at the strong level, as measured by Best’s Capital Adequacy Ratio (BCAR), along with strong underwriting practices. The ratings also recognize Gsalud’s affiliation and strategic importance to its ultimate parent, Peña Verde, S.A.B., the leading group in Mexico’s insurance and reinsurance industries, which provides synergies and operating efficiencies. Offsetting these positive rating factors is Gsalud’s concentration in a single line of business in Mexico’s highly competitive health insurance market.
Gsalud is a fully owned subsidiary of General de Seguros, S.A. (Genseg) and is focused solely on health insurance. The company provides products mainly in the individual and collective health segments, as well as for major medical expenses. Gsalud has used the same distribution channels as Genseg, which involves agents, brokers and commercial offices.
Gsalud’s strong level of risk-adjusted capitalization, as measured by BCAR, is expected to be strengthened in the following years due to the exercise of an already approved capital contribution of MXN 60 million. Historically, the company’s strong underwriting practices have resulted in positive technical performance with no dependence on investment revenue to achieve positive bottom-line results. However, 2021 resulted in a negative net income, and 2022 continued the tendency of achieving combined ratios above the 100% threshold, due to a higher expense ratio and a similar loss ratio than the previous year. Investment results, while positive, could not offset technical results. As of September 2023, the company continues to adjust its underwriting to return to premium sufficiency levels. Additionally, AM Best will continue to monitor the relevance of investment income for the company’s net result.
The company benefits from being integrated into the Peña Verde, S.A.B. group, gaining operational advantage through common systems, procedures and ERM practices.
Gsalud continues with its comprehensive transformation project, which includes implementing a new core system, pricing and risk-assessment tools, digital platforms and products for agents and policyholders, as part of its strategy to strengthen its underwriting practices and increase market scope.
The revised outlooks to negative from stable reflect the recent negative trend in operating performance, despite the company’s efforts to improve its underwriting.
Negative rating actions could take place if the negative trend in operating performance is not reversed by Gsalud’s efforts to improve underwriting. Conversely, positive rating actions are not expected in the medium term; however, the balance sheet assessment could benefit from a revised risk appetite and growing capital base.
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 May 4, 2023)
- Understanding Global BCAR (Version July 6, 2023)
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- AM Best’s Ratings On a National Scale (Version June 15, 2023)
- Scoring and Assessing Innovation (Version Feb. 27, 2023)
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, relevant sources of information and the frequency for updating ratings, please refer to Guide to Best’s Credit Ratings.
- Previous Rating Date: Dec. 9, 2022
- Initial Rating Date: Nov. 30, 2016
- Date Range of Financial Data Used: Dec. 31, 2017-Sept. 30, 2023
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