A.M. Best Affirms Credit Ratings of Sompo Seguros Mexico, S.A. de C.V.

A.M. Best has affirmed the Financial Strength Rating of A+ (Superior), the Long-Term Issuer Credit Rating of “aa-”, and the Mexico National Scale Rating of “aaa.MX” of Sompo Seguros Mexico, S.A. de C.V. (Sompo Mexico) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Sompo Mexico’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

The ratings of Sompo Mexico also reflect the company’s integration and support from its group through its holding company, Sompo America Insurance Company (SAIC), which provides synergies and operating efficiencies to the Mexico subsidiary. Sompo Mexico maintains strong risk-adjusted capitalization, good operating performance and a solid reinsurance program. Partially offsetting these positive rating factors is the company’s small market share, even though its combined ratio and profitability levels compare well with the industry.

Sompo Mexico initiated activities in 1998; the company underwrites property/casualty business and stands as a strategic hub from which its group plans to continue expanding operations into other Latin America markets. Sompo Mexico exclusively underwrites referred business from its group, whose ultimate parent is SOMPO Holdings, Inc.

Sompo Mexico’s strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is supported by the company’s small retention profile, historical positive bottom-line results reflected in good profitability metrics and conservative profit retention policies. Sompo Mexico’s strong underwriting results are mainly a consequence of underwriting referred businesses for the Mexico operations of its group’s global clients, as well as commissions from a diversified reinsurance program with highly rated reinsurers, which includes SAIC as the program leader. In addition, the company’s conservative investment policies provide a steady flow of revenues in support of net income. In 2017, Sompo Mexico maintained its steady operating performance, reflected in an average five-year combined ratio of 12.3% and return on equity of 16.8%. Moreover, the company benefits from being integrated into the group, gaining operational leverage through the same systems, procedures and ERM practices.

Positive rating actions on the group will most likely result in equivalent rating actions for Sompo Mexico, unless A.M. Best determines that the strategic importance of the Mexico subsidiary to its group has decreased. Sompo Mexico also has to maintain strong risk-adjusted capitalization supported by good technical and bottom-line results in order for positive rating actions to occur. Conversely, the ratings of Sompo Mexico will mirror any negative rating actions taken on the group. Sustained deterioration in operating performance that leads to a significant decline in its risk-adjusted capitalization to levels no longer supportive of the current ratings also would trigger negative rating actions. Potential large-scale catastrophe events or a failure by the group to execute its merger & acquisition strategy also could cause downward ratings pressure if the financial condition is adversely affected.

This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit

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