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AM Best Affirms Credit Ratings of MAPFRE Fianzas, S.A.

AM Best has affirmed the Financial Strength Rating of A (Excellent), the Long-Term Issuer Credit Rating of "a+" and the Mexico National Scale Rating of "aaa.MX" of MAPFRE Fianzas, S.A. (MF) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect MF’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 (ERM).

The stable outlook is derived from company’s responsible capital management in relation to its risks. MF’s ratings also reflect the strategic importance to, and strategic alignment with, MAPFRE INTERNACIONAL, S.A., as well as the synergies and operating efficiencies derived from being a group member of MAPFRE S.A., the leading insurer in Spain.

The ratings also reflect MF’s role as a complementary business line of MAPFRE MÉXICO S.A. (MM), as well as MF’s good risk-adjusted capitalization, adequate profitability as of December 2018 and solid reinsurance program. Partially offsetting these positive rating factors are the company’s low participation within the surety market and limited growth potential in a slowing economic environment. While MF is a legal subsidiary of MM, its strategy and operations are directed as a boutique business line focused on maintaining market presence and complimenting the services provided by its immediate parent.

The company holds a small market share within Mexico’s surety industry, based on gross premium written, with its portfolio is composed of administrative (95%), judicial (4%) and credit and fidelity (1%). MF’s corporate practices are in line with MM and MAPFRE S.A.

MF’s risk-adjusted capitalization remained very strong in 2018 due to its profit retention and good operating performance during the year. MF also reduced its exposure to business risk derived from contingent claims to 2% of its reported surplus, compared with 15.9% in 2016. This exposure could lead to unexpected impacts on profitability and deterioration of its capital base. Such scenarios have been incorporated into the ratings and present a key point for AM Best to review in coming years. The company’s relatively low premium volume makes it vulnerable to adverse market conditions and claims deviations, which limits AM Best’s view of the ratings. However, MF’s appropriate reinsurance program, provided by its affiliate, MAPFRE RE, Compañía de Reaseguros, S.A., partially offsets AM Best’s view.

In 2018, MF saw a small contraction of business despite a slight recovery in the market, by 0.9% year-over-year compared with 3.2% for its composite. MF maintained a similar bottom-line result to that of the previous year due to intercompany adjustments to administrative costs and better investment income.

Positive rating actions on its ultimate parent, MAPFRE S.A., could result in further positive rating actions for MF. Negative rating actions could occur if MF’s profitability is affected by material contingent claims or a higher cost structure that erodes its level of risk-adjusted capitalization to a level that no longer supports the current ratings. In addition, negative rating actions on its ultimate parent could result in a downward movement of MF’s ratings.

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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data provider specializing in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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