April 20, 2017 / 3:57 PM / 9 months ago

Fitch Affirms Seguros Inbursa's IFS and National Ratings

(The following statement was released by the rating agency) MONTERREY, April 20 (Fitch) Fitch Ratings has affirmed Seguros Inbursa, S.A., Grupo Financiero Inbursa's Insurer Financial Strength (IFS) rating at 'BBB+'/Negative Outlook and the National Scale IFS rating at 'AAA(mex)'/Stable Outlook. KEY RATING DRIVERS Seguros Inbursa, S.A.'s (Seguros Inbursa) ratings are based on legal explicit support from its holding group Grupo Financiero Inbursa (GFInbursa), whereby according to Mexico's Financial Groups Law, if required, the holding group will grant unlimited support for its subsidiaries' losses. Fitch considers GFInbursa's credit quality to be similar to that of its main subsidiary - Banco Inbursa, S.A., Institucion de Banca Multiple (BInbursa), rated 'BBB+'/Negative Outlook. The affirmation is also based on the importance of the insurance company within the financial group, considering that Seguros Inbursa represents 16.5% and 18.6% of GFInbursa's total assets and income, respectively. It is also based on the high level of management and operational integration and on the fact that the subsidiary operates in the same jurisdiction as the parent. Seguros Inbursa is the ninth-largest insurer in Mexico, with a market share of 5% in terms of premiums written according to the latest official information released by the local regulator. As of December 2016, Seguros Inbursa exceeded the local regulation solvency capital requirement by 49%. This implies Seguros Inbursa has sufficient equity in addition to technical reserves to meet its obligations to policyholders. Liabilities/equity declined to 6.5x in 2016 from 7.8x in 2015 (6.7x five-year-average) due to the implementation of the new regulatory framework, which requires that a portion of reserves related to rate spread be accounted for as equity. Fitch expects Seguros Inbursa's leverage ratios to gradually return to their historical average, or even below, in the absence of additional regulatory changes and changes in rates. Seguros Inbursa's five-year average operational ratio was 86.1%, greater than peer averages for 2016 of 83.2%. The company's ratio decreased to 76% as of year-end 2016, impacted by the increase in financial results, and by a lower catastrophic reserve requirement. The latter, along with the absence of catastrophic events resulted in a decrease in the claims ratio to 72% from 77%. Seguros Inbursa achieved net income of MXN2.3 million. Fitch expects that over the mid- to long-term, Seguros Inbursa's profitability ratios should remain at around 2016'S observed values. Possible deviations may arise due to additional regulatory requirements as well as changes in the intrinsic performance of the company. The company's stringent technical and catastrophe reserving policies, combined with the premium distribution and retention levels of its premium portfolio, led to ample coverage of adjusted technical reserves over retained risks of 3.0x as of December 2016. Seguros Inbursa's extensive reinsurance protection leads to an equity to catastrophe exposure ratio of 0.6% RATING SENSITIVITIES Seguros Inbursa's rating is aligned with GFInbursa's financial profile, whose credit quality is considered by Fitch as similar to its core operative subsidiary, BInbursa, based on the legal explicit support given by GFInbursa through their Unique Responsibilities Agreement. FULL LIST OF RATING ACTIONS Seguros Inbursa, S.A., Grupo Financiero Inbursa --Insurer Financial Strength affirmed at 'BBB+'; Negative Outlook --National Insurance Financial Strength affirmed at 'AAA(mex)'; Stable Outlook 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 Elena Turrubiartes Director +5281 8399 9100 ext.1516 Committee Chairperson Julie Burke Managing Director +1-312-368-3158 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. In applying Fitch's insurance criteria with respect to the impact of ownership on Seguros Inbursa's ratings, Fitch considered how the ratings could theoretically be impacted under Fitch's bank support criteria. Fitch's insurance criteria with respect to ownership are principles-based, and the noted bank criteria was used to help inform Fitch's judgment in applying those principles. Additional information is available on www.fitchratings.com Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Insurance Rating Methodology (pub. 15 Sep 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation 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. 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