A.M. Best Upgrades Credit Ratings of Sompo Seguros Mexico, S.A. de C.V.

MEXICO CITY--(BUSINESS WIRE)-- A.M. Best has upgraded the Financial Strength Rating (FSR) to A+ (Superior) from A (Excellent), the Long-Term Issuer Credit Rating (Long-Term ICR) to “aa-” from “a+”, and affirmed the Mexico National Scale Rating of “aaa.MX” of Sompo Seguros Mexico, S.A. de C.V. (Sompo Mexico) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) is stable.

The upgrade of the ratings of Sompo Mexico reflects the company’s integration and support from its group through its holding company, Sompo America Insurance Company (Sompo America), which provides synergies and operating efficiencies to the Mexican subsidiary. Sompo Mexico maintains strong risk-adjusted capitalization, good operating performance and a solid reinsurance program. Partially offsetting these positive rating factors are the company’s small market share, even though its combined ratio and profitability levels compare well with the industry.

Sompo Mexico initiated activities in 1998; the company underwrites property/casualty business and stands as a strategic hub from which its group plans to continue expanding operations into other Latin America markets. Sompo Mexico exclusively underwrites referred business from its group, whose ultimate parent is SOMPO Holdings, Inc.

Sompo Mexico’s excellent risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is supported by the company’s small retention profile, historical positive bottom-line results reflected in good profitability metrics and conservative profit retention policies. Sompo Mexico’s strong underwriting results are mainly a consequence of underwriting referred businesses for the Mexico operations of its group’s global clients, as well as commissions from a diversified reinsurance program with highly rated reinsurers, which includes Sompo America as the program leader. In addition, the company’s conservative investment policies provide a steady flow of revenues in support of net income. In 2016, Sompo Mexico maintained its steady operating performance, reflected in an average five-year combined ratio of 6.3% and return on equity of 14.2%. Moreover, the company benefits from being integrated into the group, gaining operational leverage through the same systems, procedures and enterprise risk management practices.

Positive rating actions on the group will most likely result in equivalent rating actions for Sompo Mexico, unless A.M. Best determines that the strategic importance of the Mexican subsidiary to its group has decreased. Sompo Mexico also has to maintain strong risk-adjusted capitalization supported by good technical and bottom-line results in order for positive rating actions to take place. Conversely, the ratings of Sompo Mexico will mirror any negative rating actions on the group. A sustained deterioration in operating performance that leads to a significant decline in its risk-adjusted capitalization to levels no longer supportive of the current ratings also would trigger negative rating actions.

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:

• A.M. Best’s Ratings on a National Scale (Version Sept. 5, 2014)
• Analyzing Insurance Holding Company Liquidity (Version March 25, 2013)
• Catastrophe Analysis in A.M. Best Ratings (Version Nov. 3, 2011)
• Evaluating Country Risk (Version May 2, 2012)
• Insurance Holding Company and Debt Ratings (Version May 6, 2014)
• Rating Members of Insurance Groups (Version Dec. 15, 2014)
• Risk Management and the Rating Process for Insurance Companies (Version April 2, 2013)
• Understanding Universal BCAR (Version May 1, 2017)

View a general description of the policies and procedures used to determine credit ratings. Also in accordance with Mexican regulations, the following is a link to required disclosures – A.M. Best America Latina Supplementary Disclosure.

• Previous Rating Date: April 13, 2016
• Date of Financial Data Used: March 31, 2017

This press release relates to rating(s) that have been published on A.M. Best's website. For additional rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.

A.M. Best does not validate or certify the information provided by the client in order to issue a credit rating.

While the information obtained from the material source(s) is believed to be reliable, its accuracy is not guaranteed. A.M. Best does not audit the company’s financial records or statements, or otherwise independently verify the accuracy and reliability of the information; therefore, A.M. Best cannot attest as to the accuracy of the information provided.

A.M. Best’s credit ratings are independent and objective opinions, not statements of fact. A.M. Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. A.M. Best’s credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions. View our entire notice for complete details.

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A.M. Best

Olga Rubo

Associate Financial Analyst

+52 55 1102 2720, ext. 134

olga.rubo@ambest.com

or

Alfonso Novelo

Director, Analytics

+52 55 1102 2720, ext. 107

alfonso.novelo@ambest.com

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Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

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Jim Peavy

Director, Public Relations

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james.peavy@ambest.com

Source: A.M. Best