Reuters logo
9 months ago
Fitch Affirms Der Neue Horizont Re's Int'l and Nat'l IFS Ratings at 'B'/'BBB-(mex)'; Outlook Stable
December 8, 2016 / 4:55 PM / 9 months ago

Fitch Affirms Der Neue Horizont Re's Int'l and Nat'l IFS Ratings at 'B'/'BBB-(mex)'; Outlook Stable

(The following statement was released by the rating agency) MONTERREY, December 08 (Fitch) Fitch Ratings has affirmed Der Neue Horizont Re, S.A.'s (Der Neue) 'B' International Insurer Financial Strength (IFS) rating and National Scale IFS rating at 'B'/'BBB-(mex)'. The Rating Outlook is Stable. KEY RATING DRIVERS The ratings were assigned based on a stand-alone approach which indicates that the company is rated strictly based on its individual financial profile. In this case, Der Neue's assessment is reflected in the IFS. Fitch's decision to use an individual approach is based on the lack of data with which to determine stakeholder's credit profile and inclination to provide support whenever the company is under pressure. Also, external barriers may exist restricting capital/resources transfer among subsidiaries. Der Neue became authorized by Mexico's Insurance and Surety National Commission (CNSF; on Dec. 13, 2014); as of September 2016, the company had grown its capital to USD17.1 million. At year-end 2015, Der Neue was the second largest company in terms of premium taken in the agricultural sector. Fitch recognizes that market conditions benefit company growth; nevertheless, any expansion must be consistent with both financial and operational capacities of the company. The inherent lack of a track record is a significant limitation on the current ratings. The company's financial performance is initially limited by risks faced by a start-up company in a highly competitive market. In this sense, Der Neue's capacity to generate a critical mass in premiums that allow it to absorb operating costs and claims, in a competitive market and limited to product marketing, will be determining for future performance of the insurer. Also, considering the low-risk retention plan (less than 5% of premiums), future development relies on its ability to retain a good reinsurance portfolio and also good underwriting results in order to maximize the commission income which is a key portion of its expected recurring revenues. As of September 2016, the company has not required further capital injection different from the that needed to start operations of MXN92.5 million (USD4.8 million) Through the Board of Directors, underwriting is limited by the appetite defined by its stakeholders, which we consider a conservative approach. Liabilities-to-assets is 1.69x, lower than the market's five-year average of 5.63x; also, earned net premium plus adjusted assets by equity was 1.59x, favorable when compared to the sector's average of 6.72x. The company business plan calls for maximum leverage (liabilities-to-equity) of 3.0x, while the expected low retention level should yield a ratio of net retained premiums-to-equity no higher than 26%. Der Neue's equity level to leverage its growth strategy in the short term is adequate and aligned with assumed risks, though the projections provided may be sensitive to changes in terms of expected claims ratios, expenses, or cost of the reinsurance program. Fitch will monitor how performance of the company may affect its internal capital generation. The investment portfolio is concentrated in Mexican federal government instruments; 60% is concentrated in CETES payable in 28 days, the remaining is invested in debt certificates. As of September 2016, liquid assets by reserves was 1.35x, favorable compared to the sector's five-year average of 0.95x. The company expects to preserve its current investment policy maximizing low-risk federal government instruments as the vast majority of its investments. The company manages a diversified reinsurance program through quota share contracts for the agricultural sector composed of: Swiss Re, Partner Re, Liberty Syndicates, Oddysey Re, Reaseguradora Patria, Qatar Re, TransAtlantic Re, Barents Re, and Navigators Re; Swiss Re is the major participant. Maximum legal retention of the company represents 1.5% of equity, which in Fitch's opinion is adequate. Despite the former, Fitch acknowledges that the presented business plan relies heavily on a good-quality and wide-scope reinsurance program, which is a challenge to maintain over time for a recently started company. Changes in the reinsurance program may arise from changes in the current ratings. RATING SENSITIVITIES Upside potential is somehow tied to the successful realization of the company's business plan in the next two years and its ability to post positive operating results, the good quality of its investments, and a conservative reinsurance program. Failure to deliver results as indicated in its business plans in terms of premium growth, retention levels and overall profitability and capitalization, may result in a rating downgrade. FULL LIST OF RATING ACTIONS Fitch has affirmed the following ratings: Der Neue Horizont Re, S.A. --Insurer Financial Strength at 'B'; --National IFS at 'BBB-(mex)'. Contact: Primary Analyst Eugenia Martinez Associate Director +5281 8399 9155 Fitch Ratings Mexico Prol. Alfonso Reyes 2612, Piso 8, Monterrey NL, 64920 Secondary Analyst Rosa Turrubiartes Analyst +52 (81) 83-99-9100 ext.1516 Committee Chairperson Eduardo Recinos Senior Director +503 5216 6600 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Date of Relevant Rating Committee: Dec. 7, 2016 Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 15 Sep 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1016138 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below