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

MEXICO CITY--(BUSINESS WIRE)--A.M. 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 XL Seguros Mexico, S.A. de C.V. (XLSM)
(Mexico). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect XLSM’s regional importance to XL Group Ltd
(XL), strong financial strength supported by its reinsurance program,
adequate capital position and financial support of its parent, which are
part of the benefits of being part of the XL group. Partially offsetting
these positive rating factors are the dependence on revenues from its
reinsurer and its exposure to adverse credit events.

XLSM is an operating entity of XL, a leading provider of global
insurance and reinsurance coverages to industrial, commercial and
professional service firms, insurance companies and other enterprises on
a worldwide basis (see related press
). As of June 2017, XL had gross written premiums of USD 8.3
billion and assets of USD 62.4 billion.

XLSM was constituted and began operations in 2004 as a subsidiary of XL
Swiss Holdings Ltd, which holds a 99.99% stake and is owned by XL.
Through its Mexico City and Monterrey offices, XLSM provides local and
multinational companies, as well as its network partners across Latin
America and the Caribbean, with risk engineering and customized
insurance solutions.

XLSM benefits from being integrated into the XL group, gaining
operational leverage through the same practices and procedures,
reinsurance, underwriting selection and enterprise risk management
practices. XLSM serves as an underwriting channel for the group, ceding
99.9% of written premiums to its British affiliate, XL Insurance
Company SE
. This enables the company to reduce its underwriting and
leverage risk. However, given the nature of its operation, XLSM is
susceptible to credit risk due to the high amount of reinsurance
recoverables, which A.M. Best believes should not be a major concern
given that these exposures are within the group.

Historically, XLSM has produced marginal losses; however, since 2015,
the company has been able to produce positive bottom-line results due to
efficiencies in operating and administrative expenses, and the sizeable
growth the company achieved during 2016.

XL historically has demonstrated its support for XLSM by providing
capital contributions during the past five years. The last capital
contribution took place in 2015, which was equivalent to 18% of XLSM’s
2014 reported surplus. This, in addition to good profitability
indicators for year-end 2015 and 2016, resulted in solid risk-adjusted
capital, as measured by Best’s Capital Adequacy Ratio (BCAR). During
2017, A.M. Best expects XLSM to have a more stable operating performance
considering the company’s growth targets.

If there are positive rating actions taken on the main operating
subsidiaries of XL as a result of the continuation of the sound and
streamlined integration process, moderate debt and leverage measures and
solid operating results coupled with strong risk-adjusted
capitalization, the global scale ratings of XLSM will move in tandem.
Likewise, if there are negative rating actions taken on XL as a result
of negative operating performance trends accompanied by a significant
reduction in risk-adjusted capitalization, the ratings of the Mexico
subsidiary will mirror the same adjustments. Additionally, negative
rating movements might occur if A.M. Best’s view of XLSM’s strategic
importance to the XL group weakens.

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:

  • A.M. Best’s Ratings On a National Scale (Version Sept. 5, 2014)
  • Analyzing Insurance Holding Company Liquidity (Version March 25, 2013)
  • Catastrophe Analysis in A.M. Best Ratings (Version Nov. 3, 2011)
  • Evaluating Country Risk (Version May 2, 2012)
  • 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:

  • Understanding BCAR for U.S. Property/Casualty Insurers (Version April
    24, 2017)

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: Aug. 3, 2016
  • Date of Financial Data Used: June 30, 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
Rating Activity
web page.

A.M. 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. A.M. Best does
not audit the company’s financial records or statements, or otherwise
independently verify the accuracy and reliability of the information;
therefore, A.M. Best cannot attest as to the accuracy of the information

A.M. Best’s credit ratings are independent and objective opinions,
not statements of fact. A.M. 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. A.M. Best’s
credit opinions are not recommendations to buy, sell or hold securities,
or to make any other investment decisions. View our
for complete details.

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. For information on the proper media use
of Best’s Credit Ratings and A.M. Best press releases, please view
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