MEXICO CITY, July 15, 2022--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B+ (Good), the Long-Term Issuer Credit Rating of "bbb-" (Good) and the Mexico National Scale Rating of "aa-.MX" (Superior) of Quálitas Compañía de Seguros S.A. de C.V. (Quálitas) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) is positive.
The ratings reflect Quálitas’ balance sheet strength, which AM Best assesses as adequate, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The positive outlooks reflect Quálitas’ continued improvement in risk-adjusted capitalization, which if maintained, should result in enhanced balance sheet strength driven by positive bottom-line results.
Quálitas’ balance sheet strength is underpinned by its strengthened risk-adjusted capitalization, sustained premium sufficiency and profitability metrics, the company’s consistent leading position in Mexico’s auto insurance segment and its strong distribution network. Partially offsetting these positive rating factors are the adverse conditions present in Mexico’s economy and financial markets, mainly the large contraction in new car sales and the compromised quality and liquidity of securities in the country.
Quálitas has established a strong distribution capability across Mexico through its network of local agents, financial institutions and service offices. This has enabled the company to maintain its leading market position in Mexico’s auto insurance segment and achieve a 32% market share amid challenging competitive conditions. Quálitas differentiates from the rest of its competitors in the auto insurance sector by its market recognition and ability to make adjustments in pricing and fees successfully, achieving to surpass its premium growth targets in 2021. The company expects premium growth to be stable in the near and medium term, underpinned in its business capabilities, applied to the sectors of car sales and tourism, among others, as the economic activity reactivates in the country.
Quálitas’ risk-adjusted capitalization has strengthened over time due to its sound net results and reduced exposure to equities in its investment portfolio. AM Best will continue to monitor the effects on the company’s balance sheet, derived from the developments in its domestic financial markets. Nevertheless, the shift in its risk profile, in addition to the short tenor of its investments and a proper matching in currencies, provides the company with financial flexibility to react in the best interest of its capital position.
The strong assessment of Quálitas’ operating performance is supported by its capacity to maintain premium sufficiency levels over the past six years, adjust prices and manage claims even in the wake of a sharp decline in car sales, amid a challenging period for Mexico’s economy. Quálitas’ claim management and market presence, in addition with controlled administrative expenses and underwriting, provide the company with the necessary tools to maintain a profitable profile.
Positive rating actions could occur in the near to medium term if Quálitas is able to maintain a stable trend of improved risk-adjusted capitalization, sustained in profitable results and a risk profile that continues to reflect a lower exposure to riskier assets. Negative rating actions could occur if Quálitas’ operating performance deteriorates to a point no longer supportive of the strong assessment, due to adverse market conditions or changes in underwriting. Negative rating actions also could take place should risk-adjusted capitalization deteriorate below current levels, due to capital outflows or lower available capital to face risks.
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 use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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