A.M. Best Upgrades Credit Ratings of General de Salud Compañía de Seguros S.A.. The outlook of these Credit Ratings (ratings) has been revised to stable from positive.
The rating upgrades reflect Gsalud’s balance sheet strength that is underpinned by risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), strong underwriting practices and supportive reinsurance program. The ratings also recognize Gsalud’s affiliation and strategic importance to its ultimate parent, Peña Verde, S.A.B., a leading group in Mexico’s (re)insurance industry, which provides synergies and operating efficiencies. Offsetting these positive rating factors are Gsalud’s concentration in one business line and the highly competitive health insurance market.
Gsalud is a fully owned subsidiary of General de Seguros, S.A.B. (General de Seguros) and focused solely on health insurance. The company provides products mainly in the individual and collective health segments, as well as for major medical expenses. Gsalud has used the same distribution channels as General de Seguros, which involves agents, brokers and commercial offices.
Gsalud’s strongest risk-adjusted capitalization is maintained despite its increased risk appetite, as reflected by a higher exposure to shares, which makes the company susceptible to equity risk according to BCAR. Historically, the company’s strong underwriting practices have resulted in positive technical performance with no dependence on investment revenue to achieve positive bottom line. A.M. Best expects the company to maintain this trend. In 2017, Gsalud sustained profitability as reflected in a 22.3% return on equity.
The company’s investment policies are conservative, providing a steady flow of revenue to support its positive operating results. Moreover, the company benefits from being integrated into the Peña Verde, S.A.B. group, gaining operational leverage through common systems, procedures and ERM practices.
A.M. Best expects underwriting results to further reinforce the company’s operating performance, and thus capitalization levels. Factors that may trigger positive rating actions include a continued generation of underwriting earnings that strengthen risk-adjusted capitalization levels. The company’s current ratings could come under pressure should a lack of underwriting discipline result in overall profitability falling short of A.M. Best’s expectations, or if capitalization is no longer supportive of the current ratings.
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