AM Best Upgrades Credit Ratings of Grupo Aserta S.A.P.I. de C.V. and Its Main Subsidiaries, Revises Outlooks to Stable

NOVEMBER 08, 2024 02:12 PM (EST)

AM Best Upgrades Credit Ratings of Grupo Aserta S.A.P.I. de C.V. and Its Main Subsidiaries, Revises Outlooks to Stable

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FOR IMMEDIATE RELEASE

MEXICO CITY - NOVEMBER 08, 2024 02:12 PM (EST)
AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to "bbb" (Good) from "bbb-" (Good) and the Mexico National Scale Rating (NSR) to "aa.MX" (Superior) from "aa-.MX" (Superior) of Grupo Aserta S.A.P.I. de C.V. (GA). Concurrently, AM Best has upgraded the Financial Strength Rating to A (Excellent) from A- (Excellent), the Long-Term ICR to "a" (Excellent) from "a-" (Excellent) and affirmed the NSR of "aaa.MX" (Exceptional) 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 GA. The outlook of these Credit Ratings (ratings) has been revised to stable from positive while the NSR outlook is stable. All companies are domiciled in Mexico City, Mexico.

These ratings reflect AISA and Aserta's consolidated balance sheet strength, which AM Best assesses at the strongest level, as well as their strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The stable outlook reflects AM Best's expectation that GA's balance sheet strength assessment will continue to develop positively while ongoing strategic initiatives help further diversify revenues and net income.

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 2023, most of the business volume corresponding to surety insurance was issued primarily through 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 GA.

The rating upgrades result from a consistent improvement in balance sheet strength over the past five years, supported by positive bottom-line results and prudent asset allocation. The group's positive rating factors are driven by its surety companies' solid surplus positions and sound underwriting practices, in conjunction with reinsurance programs placed among highly rated reinsurance counterparties. In addition, the geographic expansion through Aserta's Spain branch has been an important driver of profitability and growth. The group has invested in innovative initiatives that have differentiated it from competitors and added value for its clients.

As of September 2024, Mexico's surety market continues to show hardening conditions amid overall signs of growth, specifically in infrastructure projects. The companies have reported positive bottom-line results for the past nine years, with a stable return on gross written premium across different business cycles and adequate profitability metrics in comparison with other Mexico surety writers. At the same time, GA 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 through its registration in other territories generates business. 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).

GA 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.

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 Mexico's 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. Although unlikely in the short term, positive rating actions could take place for GA's subsidiaries if the companies continue to strengthen their capital base and financial strength while successfully implementing a geographic diversification strategy.

The methodology used in determining these ratings is Best's Credit Rating Methodology (Version Aug. 29, 2024), which provides a comprehensive explanation of AM 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:

· Evaluating Country Risk (June 6, 2024)

· Understanding Global BCAR (Aug. 1, 2024)

· Available Capital and Insurance Holding Company Analysis (Aug. 15, 2024)

· Rating Surety Companies (April 25, 2024)

· Best's National Scale Ratings (May 16, 2024)

· Scoring and Assessing Innovation (Feb. 27, 2023)

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, relevant sources of information and the frequency for updating ratings, please refer to Guide to Best's Credit Ratings.

· Previous Rating Date: Dec. 8, 2023

· Initial Rating Date: Feb. 6, 2015

· Date Range of Financial Data Used: Dec. 31, 2019-Sep. 30, 2024

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