MEXICO CITY--(BUSINESS WIRE)--AM Best has affirmed the Mexico National Scale Rating (NSR) of “aa-.MX” (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb-” (Good) of Controladora Aserta S.A.P.I. de C.V. (CA). Concurrently, AM Best has affirmed the NSR of “aaa.MX” (Exceptional), the Financial Strength Rating of A- (Excellent) and the Long-Term ICR of “a-” (Excellent) of Aseguradora Insurgentes, S.A. de C.V. (AISA), and its sister company, Aseguradora Aserta, S.A. de C.V. (Aserta), which are the main subsidiaries of CA. The outlook of these Credit Ratings (ratings) is stable. All companies are domiciled in Mexico City, Mexico.
The ratings reflect AISA and Aserta’s consolidated balance sheet strength, which AM Best assesses as very strong, as well as their strong operating performance, neutral business profile and appropriate enterprise risk management.
The stable outlooks reflect AM Best’s expectation that CA will maintain its overall balance sheet strength assessment level, while ongoing strategic initiatives implemented by management will help sustain its current operating performance over the intermediate term.
In January 2017, AISA and Aserta were authorized to operate as insurances entities under a surety insurance (seguro de caución) license, and changed their names from Afianzadora Insurgentes, S.A. de C.V. and Afianzadora Aserta, S.A. de C.V., respectively. In July 2018, the companies received approval to underwrite surety, surety insurance and credit insurance. As of December 2021, most of the business volume corresponding to surety insurance was issued primarily in Aserta’s Spain branch office.
The ratings also reflect the group’s leading position in Mexico’s surety market, historically good consolidated operating performance throughout the market cycle and its seasoned management team. In addition, the ratings recognize the companies’ affiliation as larger members of CA.
The group’s positive rating factors are driven by its surety insurance companies’ solid surplus positions and sound underwriting practices, in conjunction with reinsurance programs placed among highly rated reinsurance counterparties. AISA and Aserta have maintained positive bottom-line results despite the slow development of Mexico’s surety industry during the past few years and into 2022. In addition, the geographic expansion through Aserta’s Spain branch has been an important driver of profitability and growth.
As of September 2022, Mexico’s surety market continues to show signs of recovery, fostering conditions for growth in the surety segment, specifically in infrastructure projects. The companies have reported positive bottom-line results for the past seven years, with a stable return on gross written premium across different business cycles and changing markets, and adequate profitability metrics in comparison with other Mexico surety writers. At the same time, CA has taken measures to counter potentially adverse market conditions, and diversified its revenue further by increasing its international presence and by taking advantage of new surety insurance opportunities. Going forward, the company expects to continue expanding into Spain as global business from its registration in other territories starts to flow. AM Best expects AISA and Aserta to maintain their strong market share and meet expansion targets while maintaining supportive risk-adjusted capitalization levels, as measured by Best’s Capital Adequacy Ratio (BCAR).
CA is well-protected by its reinsurance program and its contingency reserves. The company’s appropriate ERM framework has allowed it to manage exposures effectively and make efficient use of its capital to improve its solvency.
Positive rating actions could take place for CA and its subsidiaries if the companies continue to strengthen its capital base and financial strength while successfully implementing a geographic diversification strategy. Factors that could lead to negative rating actions are downfalls in the expected performance of the companies in terms of profitability and capital generation. Furthermore, negative rating actions also could result from adverse scenarios in the surety market that translate into material deterioration of the company’s risk-adjusted capitalization to levels that AM Best considers non-supportive of the current ratings.
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