CONTACTS:
FOR IMMEDIATE RELEASE
MEXICO CITY - NOVEMBER 07, 2023 01:31 PM (EST)
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 Tokio Marine HCC Mexico Compañía Afianzadora, S.A. de C.V. (TMHCC Mexico) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect TMHCC Mexico’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The ratings also reflect TMHCC Mexico’s affiliation with its parent company, Houston Casualty Company (HC), in terms of reinsurance protection, ERM and capital commitments. Limiting the ratings is the inherent risk of a recently created company executing its business plan, and the volatility of Mexico’s economy.
TMHCC Mexico is the Mexico-based surety subsidiary of HC; the former company received regulatory approval for operations in April 2019 and issued its first policy in July 2019. HC and TMHCC Mexico also have a sister company, Tokio Marine Compañía de Seguros, S.A. de C.V. (TMX), which is domiciled in Mexico. TMHCC Mexico takes advantage of TMX’s corporate structure, which provides additional support to the operation.
TMHCC Mexico is developing its presence in Mexico through a predominant mix of construction and commercial administrative surety, strongly backed by a comprehensive reinsurance program largely placed with its parent company.
TMHCC Mexico’s very strong balance sheet strength assessment is derived from its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). To achieve its business targets, the company was capitalized with MXN 81.8 million (USD 4.3 million) as of July 2019 and might require more capital contributions as the operation evolves.
The adequate assessment of TMHCC Mexico’s operating performance reflects the successful track record of its seasoned management and underwriting team, and the operational leverage the company gains from being integrated into the Tokio Marine Group. However, the company’s business plan implementation is still evolving, and AM Best will keep monitoring its operating performance results.
As of year-end 2022, the company’s gross written premium stood at MXN 500 million, continuing the trend of surpassing the originally projected business volume, but generated a negative bottom-line result of MXN 10.4 million. Despite the significant variation in business volume, the company reports strict compliance with underwriting discipline and with its business model, coupled with several large policies.
As of June 2023, TMHCC Mexico posted positive bottom-line results, mainly due to contained management costs, and higher ceding commissions. The company’s loss ratio stood close to 0%.
Negative rating actions could take place if AM Best determines that the strategic importance of the Mexico subsidiary to the Tokio Marine group has decreased, or if the company experiences a deterioration in its risk-adjusted capitalization as a result of weak operating performance or capital outflows.
While AM Best does not consider it likely, positive rating actions could take place if Tokio Marine HCC Mexico’s operating performance improves, while maintaining prudent capital management.
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:
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.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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.
If the ratings referred in this press release do not indicate a specific country suffix, it is understood that they are granted globally and not on a national scale.
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. AM Best keeps certain activities of its business units separate from each other to preserve the independence and objectivity of their respective activities. As a result, certain business units of AM Best may have information that is not available to other AM Best business units. AM Best has established policies and procedures to maintain the confidentiality of certain confidential (non-public) information received in connection with each analytical process. 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 Performance Assessments, 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.