A.M. Best Affirms Credit Ratings of Sompo Seguros Mexico, S.A. de C.V.

MEXICO CITY--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A+
(Superior), the Long-Term Issuer Credit Rating of “aa-”, and the Mexico
National Scale Rating of “aaa.MX” of Sompo Seguros Mexico, S.A. de
C.V.
(Sompo Mexico) (Mexico City, Mexico). The outlook of these
Credit Ratings (ratings) is stable.


The ratings of Sompo Mexico reflect the company’s integration and
support from its group through its holding company, Sompo America
Insurance Company
(SAIC), which provides synergies and operating
efficiencies to the Mexican subsidiary. Sompo Mexico maintains strong
risk-adjusted capitalization, good operating performance and a solid
reinsurance program. Partially offsetting these positive rating factors
is the company’s small market share, even though its combined ratio and
profitability levels compare well with the industry.

Sompo Mexico initiated activities in 1998; the company underwrites
property/casualty business and stands as a strategic hub from which its
group plans to continue expanding operations into other Latin America
markets. Sompo Mexico exclusively underwrites referred business from its
group, whose ultimate parent is SOMPO Holdings, Inc.

Sompo Mexico’s strong risk-adjusted capitalization, as measured by
Best’s Capital Adequacy Ratio (BCAR), is supported by the company’s
small retention profile, historical positive bottom-line results
reflected in good profitability metrics and conservative profit
retention policies. Sompo Mexico’s strong underwriting results are
mainly a consequence of underwriting referred businesses for the Mexico
operations of its group’s global clients, as well as commissions from a
diversified reinsurance program with highly rated reinsurers, which
includes SAIC as the program leader. In addition, the company’s
conservative investment policies provide a steady flow of revenues in
support of net income. In 2016, Sompo Mexico maintained its steady
operating performance, reflected in an average five-year combined ratio
of 6.3% and return on equity of 14.2%. Moreover, the company benefits
from being integrated into the group, gaining operational leverage
through the same systems, procedures and enterprise risk management
practices.

Positive rating actions on the group will most likely result in
equivalent rating actions for Sompo Mexico, unless A.M. Best determines
that the strategic importance of the Mexican subsidiary to its group has
decreased. Sompo Mexico also has to maintain strong risk-adjusted
capitalization supported by good technical and bottom-line results in
order for positive rating actions to take place. Conversely, the ratings
of Sompo Mexico will mirror any negative rating actions taken on the
group. Sustained deterioration in operating performance that leads to a
significant decline in its risk-adjusted capitalization to levels no
longer supportive of the current ratings also would trigger negative
rating actions.

The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
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:

  • Analyzing Insurance Holding Company Liquidity (Version March 25, 2013)
  • Catastrophe Analysis in A.M. Best Ratings (Version Nov. 3, 2011)
  • Equity Credit for Hybrid Securities (Version April 2, 2014)
  • Insurance Holding Company and Debt Ratings (Version May 6, 2014)
  • Rating Members of Insurance Groups (Version Dec. 15, 2014)
  • Risk Management and the Rating Process for Insurance Companies
    (Version April 2, 2013)
  • Understanding Universal BCAR (Version May 1, 2017)

The following applied criteria supplemented the analysis of the ultimate
rating unit:

  • A.M. Best’s Ratings on a National Scale (Version Sept. 5, 2014)
  • Evaluating Country Risk (Version May 2, 2012)

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 Understanding
Best’s Credit Ratings
.

  • Previous Rating Date: May 10, 2017
  • Date of Financial Data Used: March 31, 2017

This press release relates to rating(s) that have been published on
A.M. 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 A.M. Best’s
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Rating Activity
web page.

A.M. Best does not validate or certify the information provided by
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While the information obtained from the material source(s) is
believed to be reliable, its accuracy is not guaranteed. A.M. Best does
not audit the company’s financial records or statements, or otherwise
independently verify the accuracy and reliability of the information;
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provided.

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