AM Best has affirmed the Financial Strength Rating of B++ (Good), the Long-Term Issuer Credit Rating of "bbb+" and the Mexico National Scale Rating of "aa+.MX" of Grupo Mexicano de Seguros, S.A. de C.V. (GMX) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) remains stable.
These ratings reflect GMX’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The ratings also reflect GMX’s improved underwriting practices, a reinsurance program placed with counterparties that have strong levels of security and GMX’s well-planned business strategy. In addition, these ratings also consider GMX’s affiliation with its immediate parent, GMS Valore, S.A. de C.V. (formerly Grupo Maxasem), which provides GMX with synergies and operating efficiencies as a member of this group. Offsetting these positive rating factors is the strong competitive environment GMX experiences in its main business lines, which could pressure future underwriting performance.
The company initiated operations in Mexico City in 1998. GMX underwrites property/casualty insurance and ranked ninth in this segment, with 3.9% market share as of September 2019, based on direct premiums written. The company’s main business line is personal liability, and it operates mainly through a network of independent agents and promoters, as well as online sales.
GMX’s overall underwriting results have improved significantly from prior years, as its combined ratio has remained below the 100% threshold since 2015. During 2018, the company improved its underwriting results and increased retention, and when coupled with lower claims and stable management expenses, enhanced overall profitability. As of September 2019, the company maintained adequate underwriting performance and investment yields, and recorded positive bottom-line results.
GMX’s management team has a solid track record in terms of implementing strategies and taking advantage of opportunities for innovation in Mexico’s insurance market given the increased competition.
Factors that may lead to positive rating actions include sustained improvement in the company’s underwriting performance and material enhancements in its risk-adjusted capitalization.
Negative rating actions could occur should GMX experience a continued deterioration of underwriting results or a decline in balance sheet strength. A substantial and sustained lack of coverage for regulatory capital requirements also could create negative rating pressure.
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