AM Best Upgrades Issuer Credit Rating and National Scale Rating of Grupo Mexicano de Seguros, S.A. de C.V.

AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” from “bbb” and the Mexico National Scale Rating (NSR) to “aa+.MX” from “aa.MX”, as well as affirmed the Financial Strength Rating (FSR) of B++ (Good) of Grupo Mexicano de Seguros, S.A. de C.V. (GMX) (Mexico City, Mexico). The outlook of the Long-Term ICR and the NSR has been revised to stable from positive, while the outlook for the FSR remains stable.

The Credit Ratings (ratings) reflect GMX’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The upgrade of GMX’s Long-Term ICR and NSR primarily reflects the improved level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), mainly driven by positive bottom-line results.

The ratings also reflect GMX’s improved underwriting practices, a reinsurance program placed with counterparties with strong levels of security and a well-planned business strategy, as well as GMX’s affiliation with its immediate parent, GMS Valore, S.A. de C.V. (formerly Grupo Maxasem), which includes the synergies and operating efficiencies the company benefits from as a member of this group. Offsetting these positive rating factors is the strong competitive environment GMX experiences in its main business lines, which could pressure future underwriting performance.

The company initiated operations in Mexico City in 1998. GMX underwrites property/casualty insurance and ranked 11th in this segment, with 3.5% market share as of September 2018, based on written premiums. The company’s main business line is personal liability, and it operates mainly through a network of independent agents and promoters, as well as online sales.

GMX’s overall underwriting results have significantly improved from the past years, as combined ratio has remained below the 100% threshold since 2015. During 2017, the company improved underwriting results mainly due to the changes in accounting derived from the Solvency II-type regulation, which allowed for a slimmer valuation of reserves, enhancing overall profitability. As of November 2018, the company maintained adequate underwriting performance and investment yield, and recorded positive bottom-line results.

GMX’s management team has a solid track record in terms of implementing strategy and taking advantage of opportunities for innovation in Mexico’s insurance market given the increased competition.

Factors that may lead to positive rating actions include sustained improvement in the company’s underwriting performance and material enhancements in its risk-adjusted capitalization.

Negative rating actions could occur should GMX experience a continued deterioration of underwriting results or a decline in balance sheet strength. A substantial and sustained lack of coverage for regulatory capital requirements also could create negative rating pressure.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all 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. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

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