A.M. Best Revises Outlooks to Positive for Insignia Life S.A. de C.V.
The ratings reflect Insignia’s substantial enhancement in risk-adjusted capitalization, ongoing improvement in its operating performance, continued support from its holding company and a highly experienced management team. Offsetting these positive rating factors are the company’s relatively small size within Mexico’s life insurance industry and the challenges arising from the company’s fast premium growth strategy, which is required so that the company can reach a business volume that adequately supports its expense structure.
Insignia initiated operations in Mexico in 2008. The company underwrites individual and group life insurance. Insignia operates through a commercial network of more than 3,000 agents and 12 offices in more than 10 of the principal cities in Mexico.
Insignia’s risk-adjusted capitalization follows an improving trend, as measured by Best’s Capital Adequacy Ratio (BCAR), reflecting shareholder commitment to support the company’s growth strategy while maintaining adequate capitalization. During 2015, it was A.M. Best’s view that the insurer’s risk-based capital was pressured due to a material real estate investment and negative bottom-line results. Insignia’s holding company made several capital injections in the total amount of MXN 59.4 million in 2015 to address the real estate investment and to support the company’s growth. In 2016, risk-adjusted capitalization improved, due to a MXN 33 million infusion. Risk-adjusted capitalization strengthened further in early 2017 as a result of the sale of the real estate asset. A.M. Best expects Insignia to maintain strong risk-adjusted capitalization metrics that support the current ratings and positive bottom-line results.
As a result of Insignia’s rapid premium expansion, the company historically has had to rely heavily on its holding company to maintain sound capitalization levels through capital infusions. With the sale of the real estate investment, and anticipated positive bottom-line results at year-end 2017, A.M. Best expects such dependency on the holding company to diminish. Underwriting practices are sound and in line with its industry peers, with a materially improving trend in 2016 in its loss, acquisition and operating expenses in relation to its net earned premiums.
Key factors that could lead to positive rating actions for Insignia include maintaining strong risk-based capital metrics, good underwriting results that translate into sound profitability ratios and reducing its dependence on capital injections by its holding company. Key factors that could lead to negative rating actions include a substantial deterioration in capitalization, as measured by BCAR, in a short period of time, or diminished capital support from its holding company, as well as deviations from A.M. Best’s expectations on the company’s improving operating performance.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:A.M. Best’s Ratings on a National Scale (Version Sept. 5, 2014) Analyzing Insurance Holding Company Liquidity (Version March 25, 2013) Evaluating Country Risk (Version May 2, 2012) Insurance Holding Company and Debt Ratings (Version May 6, 2014) Risk Management and the Rating Process for Insurance Companies (Version April 2, 2013) Understanding Universal BCAR (Version April 28, 2016)
View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, please refer to “Understanding Best’s Credit Ratings.”Previous Rating Date: Jan. 11, 2016 Date of Financial Data Used: Dec. 31, 2016
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