AM Best Upgrades Credit Ratings of Assurant México Units
AM Best has recently upgraded the Financial Strength Rating (FSR) of Assurant Daños México, S.A. (ADM) and Assurant Vida México, S.A. (AVM) to A (Excellent) from A- (Excellent). Along with this, the Long-Term Issuer Credit Ratings (Long-Term ICRs) for both companies have also been improved to “a” (Excellent) from “a-” (Excellent). The outlook associated with these Credit Ratings (ratings) has been revised to stable from positive. Additionally, AM Best has reaffirmed the Mexico National Scale Rating (NSR) of “aaa.MX” (Exceptional) for both ADM and AVM, maintaining a stable outlook for the NSR as well.
The latest ratings reflect ADM’s and AVM’s financial stability, which AM Best assesses as very strong. They also account for each company’s adequate operating performance, limited business profile, and sound enterprise risk management (ERM). The rating upgrade is primarily attributed to an upward reassessment of the companies’ balance sheet strength, supported by sustained risk-adjusted capitalization levels that AM Best measures using its Best’s Capital Adequacy Ratio (BCAR). This strength has been further bolstered by consistent profitability over time.
Strategic Importance of ADM and AVM in the Assurant Group
The financial ratings of ADM and AVM also take into consideration their affiliation and strategic significance to Assurant, Inc., their ultimate parent company. As key components of Assurant’s expansion strategy in the Latin American insurance market, ADM and AVM serve as important conduits for the company’s regional growth. Moreover, their solid reinsurance structure, which is primarily supported by Assurant, Inc., further strengthens their financial positioning.
Both ADM and AVM commenced operations in 2004 and are owned by Assurant Holding Mexico, S. de R.L. de C.V., a subsidiary of Assurant, Inc. The companies primarily distribute their insurance products through financial institutions, automobile companies, telecommunications carriers, retail chains, and other strategic channels. These partnerships have helped them establish a robust market presence in Mexico.
Governance, Underwriting, and Market Positioning
ADM and AVM adhere to the underwriting, ERM, and corporate governance practices established by their parent group. This alignment enables them to maintain risk control measures and benefit from Assurant’s broader strategic expertise. Additionally, these subsidiaries receive Credit substantial reinsurance support, which provides them with enhanced financial flexibility and stability. The companies also gain from Assurant’s brand recognition, which has contributed to their growing market share in Mexico.
Beyond branding and governance, ADM and AVM have also benefited from capital contributions from their parent company, ensuring that they have the necessary financial backing to meet growth targets when required. This support has enabled them to sustain financial health and achieve strategic objectives in the competitive Mexican insurance market.
Financial Performance and Capital Strength in 2023 and 2024
ADM
In 2023, ADM demonstrated notable improvements in its balance sheet strength assessment, achieving a “very strong” designation. This was largely due to continued capital base reinforcements through the reinvestment of earnings. The company experienced robust premium growth in 2023, driven by increased sales across its global auto, mobile, home, and retail insurance Credit segments. Additionally, ADM successfully established commercial alliances with high-profile distributors and global corporations, further boosting its market position.
As of December 2024, ADM had enhanced its profitability by maintaining positive technical and underwriting results while effectively controlling management expenses. The company’s profitability was also supported by an increase in investment income, which stemmed in part from its strategic asset allocation strategies.
AVM
Similarly, AVM’s balance sheet strength assessment improved to “very strong” in 2023, primarily due to increased profitability. The company’s underwriting results were further bolstered by a reserve release in 2023, largely attributed to the annualization of its policies. These Credit developments allowed AVM to present positive bottom-line results as of December 2024, supported by strong underwriting performance and additional investment income.
Future Risks and Potential Downgrades
Despite their current strong financial standing, ADM and AVM remain subject to potential risks that could impact their ratings in the future. AM Best has outlined specific conditions that could lead to negative rating actions:
- Deterioration in Operating Performance: If either company experiences a significant decline in operating performance, it could weaken their risk-adjusted capitalization, which in turn could negatively impact their ratings.
- Aggressive Premium Growth: Rapid and unchecked growth in premiums, without sufficient capital backing, could erode financial stability and lead to a decline in risk-adjusted capitalization.
- Diminished Parental Support: A reduction in support from Assurant, Inc. or a perceived decrease in the strategic importance of ADM and AVM within the Assurant group could also result in rating downgrades.
The recent upgrades by AM Best underscore the financial strength and operational stability of ADM and AVM, reflecting their consistent profitability and robust capitalization levels. As key players in Assurant’s expansion in Latin America, these subsidiaries benefit from strategic Credit alignment with their parent company, strong reinsurance structures, and Credit established distribution channels. Moving forward, maintaining disciplined growth, operational efficiency, and financial prudence will be crucial in sustaining their strong credit ratings. While the outlook remains stable, ADM and AVM must continue to demonstrate financial resilience and strategic discipline to prevent potential future downgrades.
