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 Fianzas, S.A. (MF) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) is stable.
MF is a member of 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).
MF’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.
The ratings also reflect MF’s role as a complementary business line of MAPFRE México, S.A. (MM), as well as MF’s strongest level of risk-adjusted capitalization, as measured on a consolidated basis, its consistent profitability as of December 2019 and solid reinsurance program. Partially offsetting these positive rating factors are the company’s low participation within the surety market and limited growth potential in a slowing economic environment. While MF is a legal subsidiary of MM, its strategy and operations are directed as a boutique business line focused on maintaining market presence and complimenting the services provided by its immediate parent.
The company holds a small market share within Mexico’s surety industry, based on gross premium written, with its portfolio composed mainly of administrative, judicial, and credit and fidelity business. MF’s corporate practices are in line with MM and MAPFRE S.A.
MF’s risk-adjusted capitalization remains underpinned by its profit retention and consistent operating performance during 2019. During 2019, MF continued to limit its exposure to business risk derived from contingent claims. This exposure could lead to unexpected impacts on profitability and deterioration of its capital base. Such scenarios have been incorporated into the ratings and present a key point for AM Best to review in coming years. The company’s relatively low premium volume makes it vulnerable to adverse market conditions and claims deviations, which limits AM Best’s view of the ratings. However, MF’s appropriate reinsurance program, provided by its affiliate, MAPFRE RE, Compañía de Reaseguros, S.A., partially offsets AM Best’s view.
In 2019, MF saw a small contraction of business by 2.2% year-over-year, in line with a 0.4% contraction for its composite. However, MF maintained consistent profitability driven by intercompany adjustments to administrative costs and improved investment income.
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 its profile while maintaining strong operating performance and risk-adjusted capitalization, the ratings of MF 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 MF would mirror those same actions.
A change in AM Best’s perception regarding the actual or perceived level of MF’s strategic importance to the MAPFRE group also could impact the company’s ratings.
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 Guide to 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.
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