A.M. Best Affirms Credit Ratings of Seguros Monterrey New York Life, S.A. de C.V.
Elí Sánchez, +52 55 1102 2720, ext. 108
Senior Financial Analyst
Alfonso Novelo, +52 55 1102 2720, ext. 107
Christopher Sharkey, +1 908 439 2200, ext. 5159
Manager, Public Relations
Jim Peavy, +1 908 439 2200, ext. 5644
Director, Public Relations
A.M. Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior), the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa+” and the Mexico National Scale Rating of “aaa.MX” of Seguros Monterrey New York Life, S.A. de C.V. (SMNYL) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect SMNYL’s strong integration with its parent company, New York Life Insurance Company (New York Life) (FSR A++, Long-Term ICR “aaa”), robust enterprise risk management (ERM), stable and solid risk-adjusted capitalization, good operating performance, and highly competitive position in Mexico’s life insurance segment. Partially offsetting these positive rating factors are its challenging expansion strategy within Mexico’s very competitive market and the uncertainty regarding future interest rate trends.
SMNYL is the Mexico subsidiary of New York Life and a product of the Seguros Monterrey acquisition in 2000. SMNYL, established in Mexico in 1940, mainly underwrites life products through a solid agent network. As of June 2016, SMNYL was the seventh-largest insurance company in Mexico with a market share of 5.4% and ranks fifth in the life segment with a market share of 8.6%. The company’s product portfolio is composed of individual life (64%), individual medical expenses (18%), group medical expenses (12%), group life (5%), and accidents and health (1%).
SMNYL benefits from its ultimate parent’s strong brand recognition. In addition, its integration within its group is key to the rating level, as New York Life actively supervises SMNYL’s strategy and operations, further enhancing its corporate governance and products innovation. Within New York Life’s international structure, the Mexico operation stands out as one of the most significant in terms of its good profitability and market presence, which makes the subsidiary’s operation and strategy very likely to be supported by the group if required.
During 2015 and 2016, the company continued to grow above the market, posting consistent bottom-line results and good underwriting metrics in relation to the market and its past performance. For future years, as the company makes commercial efforts to improve its market position, there might be room for larger benefits paid or higher operating expenses. However, due to the company’s robust ERM and corporate governance capabilities, A.M. Best believes that SMNYL has sufficient technical tools and market expertise to achieve an adequate balance between growth and profitability. In addition, the company presents an adequate investment yield that supports the profitability of its operation based on sound investment policies.
Risk-adjusted capitalization is strong and is expected to be further enhanced from regulatory changes in Mexico’s reserve requirements, following the best estimate of liabilities. Due to the nature of the life business and its investment component, SMNYL is susceptible to changes in interest rates, which are expected to increase during 2017. However, most of its investment portfolios are in line with the characteristics of it liabilities and group’s guidelines, placing the company in a favorable position to mitigate such increase.
A.M. Best considers SMNYL to be well-positioned at its current rating levels. Future positive rating factors that could lead to an improvement in the Long-Term ICR include: success with the company’s expansion goals; improvement in its profitability trend; and strengthening of its capital base as a result of improvements in its operating performance or by the implementation of regulatory changes done for the Mexican market. Negative rating actions could occur if the company’s operating performance weakens in the medium term due to large and sustained increases in operational and acquisition expenses or benefits paid derived from the expansion strategy of the business, materially weakening its profitability and, consequentially, its risk-adjusted capitalization. Furthermore, negative rating actions could result if A.M. Best’s view on the strategic importance of the Mexican subsidiary to its group decreases or if there are negative rating actions for New York Life.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, please refer to “Understanding Best’s Credit Ratings.”
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