AM Best has affirmed the Financial Strength Rating of A (Excellent), the Long-Term Issuer Credit Rating of “a+” and the Mexico National Scale Rating of “aaa.MX” of MAPFRE México, S.A.(MM) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) is stable.
MM is a member of the MAPFRE S.A., which on a consolidated basis has a balance sheet strength that AM Best categorizes as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
MM’s ratings also reflect its strategic importance to and alignment with MAPFRE Internacional S.A., as well as the synergies and operating efficiencies derived from being a group member of MAPFRE S.A., the leading insurer in Spain.
MM’s ratings are derived from its solid risk-adjusted capitalization and underwriting strategy, as well as its competitive position in Mexico’s insurance industry and appropriate ERM practices. Partially offsetting these positive rating factors are uncertain prospective opportunities for growth in an unwinding economy that has been slowing since 2018.
MM operates as a composite insurer of life and non-life business and ranks among Mexico’s five-largest insurers, based on written premiums.
MM’s written premiums in 2019 presented stable growth after adjusting for the biannual property-liabilities policy of Petróleos Mexicanos (PEMEX), a state-owned oil and gas company that MM started underwriting in 2015 and renewed in 2019 for USD 502 million of premium.
Technical income during 2019 reflects continued adjustments in claims controls and pricing done within its main segments in conjunction with improved management expenses. Financial income continued to influence the net result positively, which for 2019 was MXN 286 million (USD 15 million). The company showed improvement in its operating performance at year-end 2019, posting a combined ratio slightly below 100%.
The very strong assessment for MM’s balance sheet strength, as measured on a consolidated basis, remains slightly dependent upon dividend payments to its holding company. In the medium term, AM Best expects continued fine-tuning in underwriting strategy to enhance net results and therefore the continued expansion of its capital base.
ERM practices are well-established and implemented throughout the company and closely follow those set by MAPFRE S.A. This integration has benefited the company’s implementation of Mexico’s Solvency II-type regulations.
If there are positive rating actions on MAPFRE S.A’s main operating subsidiaries, as a result of a change in the key rating fundamentals, including successfully expanding of its profile while maintaining strong operating performance and risk-adjusted capitalization, the ratings of MM will likely move in tandem. Conversely, if there are negative rating actions on the MAPFRE group, as a result of a sustained decline in operating performance below AM Best’s expectation for the strong assessment level, or a sustained deterioration in MAPFRE S.A.’s consolidated risk-adjusted capitalization, the ratings of MM would mirror those same actions.
A change in AM Best’s perception regarding the actual or perceived level of MM’s strategic importance to the MAPFRE group also could impact the company’s ratings.
Press release issued by BUSINESS WIRE
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