MEXICO CITY, September 14, 2022--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent), the Long-Term Issuer Credit Rating of "a-" (Excellent) and the Mexico National Scale Rating of "aaa.MX" (Exceptional) of Stewart Title Guaranty de México, S.A. de C.V. (STGM) (Mexico). The outlook of these Credit Ratings (ratings) is stable.
STGM is a member of Stewart Title Group, which on a consolidated basis has a balance sheet strength that AM Best assesses as very strong, as well as adequate operating performance, a neutral business profile and appropriate enterprise risk management.
The ratings also reflect the integration of this Mexico subsidiary to its parent company, Stewart Title Guaranty Company (STGC), and to the group in terms of the business model and operational support. Offsetting these positive rating factors are the company’s small market share in Mexico’s insurance industry and its concentration in a single line of business.
STGM is a subsidiary of STGC, located in Houston, Texas, which, in addition to Mexico, also offers products through its subsidiaries to markets in the United States, the European Union, Australia, Costa Rica and China. Given the specialized nature of the title product and the institutional strategy, STGM’s sales efforts focus on business referred by the parent company on existing customers, which generates a limited number of policies per year.
STGM’s risk-adjusted capitalization stands at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), with the company’s performance showing an upward trend in capital and surplus growth, mainly driven by consistent positive bottom-line results, with investment and underwriting risks being the main components for required capital. Support from STGC in the past has come through capital injections, with the most-recent one in 2012, directed to help strengthen the business when required.
The company was able to regain premium volume during 2021, propelled by the reopening of public registries and notary offices, a core component for underwriting. STGM’s flexible cost structure continues to provide significant advantages to the company, allowing it to optimize expenses and achieve positive bottom-line results through investment income.
For 2022 and going forward, STGM expects premium volume to return to pre-pandemic levels as normal underwriting operations are fully reinstated, supported by its referred business system.
Positive rating actions taken on the main operating subsidiaries of Stewart Title Group that result from positive underwriting performance trends, accompanied by growth in risk-adjusted capitalization, will prompt the ratings of STGM to move in tandem. Conversely, negative rating actions taken on Stewart Title Group due to a significant deterioration in operating performance that results in a decline in its risk-adjusted capitalization levels, or if the holding company experiences liquidity issues, or a significant increase in leverage, will prompt the ratings of STGM to move in tandem. Negative rating action could also occur if challenges from rising interest rates and a slowing economy pose a significant decline in operating profitability or a material decline in risk-adjusted capitalization levels, which also will result in rating downgrades for the Mexico subsidiary.
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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