The economic environment in
Despite modest economic growth, preliminary results published as of
Annuity products shrank 21.1% due to larger participation by public health institutes in underwriting annuities. The Property and Casualty branch grew 10% due to an increase in auto insurance production, which expanded 13.7% following an increase of 13.4% in auto sales. The surety sector grew 4.6%.
Performance indicators remain stable for the first quarter 2016. The combined ratio for the insurance sector decrease to 91.0% from 92.9%; however, net result by written premium reached 11% compared to 6% at 2015, due technical reserve release which is related to the first impacts of methodological changes. However, Fitch expects that, in terms of the financial profile of the companies, the lowest reserve base will be balanced through higher equity due the introduction of new risks in solvency calculations.
The agency has also noted various entity's increased appetite to diversify reinsurance programs with high credit quality reinsurers, which benefits capital requirements for counterparty and concentration risks.
For year-end 2016, Fitch expects the sector's earnings to benefit from higher technical reserves release and also by the effect of annualizing premiums. Better 2016 results will allow a strengthening of the company's equity; however, solvency ultimately will depend on the dividend distribution and reinvestment of earnings policies for each company. While the indicator of technical reserve by premiums will decrease, capitalization level should improve. Fitch will continue to analyse information as it becomes available and will provide additional commentary as it affects individual companies or the market as a whole.
Additional information is available on www.fitchratings.com
--Mexican Insurance Outlook Stable for 2016 (
--Major Regulatory Changes Face Mexican Insurance Sector (
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Source: Fitch Ratings