September 26, 2017 / 7:01 PM / a year ago

Fitch Affirms Afianzadora Aserta's National and International IFS Ratings; Outlook Stable

(The following statement was released by the rating agency) MONTERREY, September 26 (Fitch) Fitch Ratings has affirmed Afianzadora Aserta's, S.A. de C.V, Grupo Financiero Aserta (Afianzadora Aserta) Insurer Financial Strength (IFS) rating of 'BBB-' and National IFS Rating of 'AA-'. The Rating Outlook is Stable. KEY RATING DRIVERS The rating reflects the fact that Afianzadora Aserta is a subsidiary of Grupo Financiero Aserta, S.A. de C.V. (GFAserta). The group also includes Afianzadora Insurgentes, S.A. de C.V. (Afianzadora Insurgentes) and Aserta Seguros Vida, S.A. de C.V.; combined, the two surety bond companies represent 96% of the group's total assets, which, in Fitch's opinion, leads the group's credit profile to depend on that of its two surety bond companies. In addition, GFAserta is responsible for the losses and liabilities of its subsidiaries, according to Mexico's Financial Group Law (Convenio Unico de Responsabilidades). Afianzadora Aserta is the third largest of 15 Mexican surety bond companies, boasting a market share of 18% as of year-end 2016. GFAserta's strategy focuses on the subsidiary underwriting what will bring the most benefits to the group, depending on the technical advantages of each company given the type of business. The group's two surety bond companies have a combined market share of 25.9%. In Fitch's opinion, the company's leverage metrics are higher than the sector's local average and its regional peers' averages. Pressure on capital is generated by Mexico's stringent provisioning regulations, as well as the group's generous dividend policy. Afianzadora Aserta's efficiency levels, measured through its operating (32%) and loss ratios (2%), have remained competitive compared to those of its peers (53.2%) as of June 2017, and have improved over 2015 levels. Risk concentrations remain stable, representing 85% of equity by group, and 21% by surety bond, and are mitigated through reinsurance contracts. As of year-end 2016, the company's investment portfolio had a strong focus on government instruments (72%), a trend that has intensified compared to previous years. The rest of the portfolio is diversified among variable income securities (8%), fixed income (11%) and foreign (8.7%). The risky-assets/equity ratio was 9.7%, similar to that of the sector (8.7%), as was the portfolio's performance (5.8% vs. 5.2%). Fitch considers the company's investment policy to be conservative and in line with current liquidity needs and the industry. Afianzadora Aserta's reserves/earned premiums ratio is in line with the local average but greater than the regional average, due to stricter regulatory requirements in Mexico. Afianzadora Aserta's reinsurance program is ample and includes contracts with international reinsurers of high credit quality, as well as with its sister company. The company's maximum loss retention is high, with its greatest-market-share product representing 15.6% of its equity per event. However, it is comparable to the sector's regional average. RATING SENSITIVITIES An improvement in Afianzadora Aserta's ratings would be triggered by lower leverage ratios and lower equity exposures, along with sustained, ample profitability metrics. A downgrade would result from higher leverage ratios and a sustained deterioration in technical profitability. FULL LIST OF RATING ACTIONS Afianzadora Aserta, S.A. de C.V, Grupo Financiero Aserta --Insurer Financial Strength affirmed at 'BBB-'; Outlook Stable; --National Insurer Financial Strength affirmed at 'AA-(mex)'. The Rating Outlook is Stable. Contact: Primary Analyst Diego Alvarez Analyst +52 81 8399-9100 Fitch Ratings Mexico Prol. Alfonso Reyes 2612 Col. Del Paseo Residencial Monterrey, N.L., 64920 Secondary Analyst Eugenia Martinez Associate Director +52 81 8399-9155 Committee Chairperson Julie Burke Managing Director +1 312-368-3158 Media Relations: Benjamin Rippey, New York, Tel: +1 646 582 4588, Email: Additional information is available on Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Metodología de Calificaciones en Escala Nacional (pub. 27 Mar 2017) here Metodología de Calificación de Seguros (pub. 19 Jun 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here 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. 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