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 (NSR) of "aaa.MX" of Seguros Inbursa, S.A. Grupo Financiero Inbursa (Seguros Inbursa) (Mexico). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Seguros Inbursa’s balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
Seguros Inbursa’s balance sheet strength is underpinned by its risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The ratings also reflect its strong operating performance, driven by consistent profitability, mainly supported by a stable flow of investment income, as well as low underwriting leverage, a diversified business profile and the company’s affiliation with Grupo Financiero Inbursa S.A.B. de C.V. (Grupo Financiero Inbursa), one of the largest financial groups in Mexico.
Seguros Inbursa underwrites life and non-life business, and remains one of the largest and most profitable domestic insurance companies in Mexico. In 2019, earthquake insurance was the company’s most profitable business line, currently representing 10.5% of gross written premiums. The company has shown disciplined underwriting in a highly competitive market, consistently reporting premium sufficiency levels that compare positively with its closest competitors. This discipline is also reflected in its stable combined ratio, which has improved each year since 2017 and maintained at a level close to 95% with little volatility in its components. In addition, investment results continue to be the main source of profitability for the company.
Historically, Seguros Inbursa has operated with low underwriting leverage. The company’s risk-adjusted capitalization remains supportive of its current ratings. Adjusted capital has grown at a compound annual growth rate of 5.6% during the past five years, and AM Best expects this trend to continue as a result of sound underwriting, conservative reserving and prudent dividend and investment policies, as well as an effective cost containment strategy. Furthermore, Seguros Inbursa continues to benefit from significant operating efficiencies afforded by Grupo Financiero Inbursa’s vast financial and system networks.
Partially offsetting these positive rating factors is the strong competition in Mexico’s insurance market, which AM Best believes could pressure the company’s profitability and market share, as well as the currently challenging state of the economy and volatile capital markets.
Key rating drivers that could lead to negative rating actions include sustained deterioration in operating results, or a significant weakening of its risk-adjusted capitalization, as measured by BCAR. Positive rating movements are unlikely in the near term.
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