AM Best Affirms Credit Ratings of Sofimex, Institucion de Garantias S.A.

MEXICO CITY--(BUSINESS WIRE)--
AM Best has affirmed the Financial Strength Rating of A- (Excellent), the Long-Term Issuer Credit Rating of “a-” (Excellent) and the Mexico National Scale Rating of “aaa.MX” (Exceptional) of Sofimex, Institucion de Garantias S.A. (Sofimex) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Sofimex’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

The ratings also reflect Sofimex’s strong operating performance in terms of profitability and competitiveness within Mexico’s surety bond market, as well as its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). These positive rating factors are limited by AM Best’s view of the highly competitive market in which the company operates, and the currently challenging economic environment.

Sofimex is a Mexico-domiciled surety and bond company that was established in 1940. The company offers surety and fidelity coverages, ranging from low limit judicial bonds to high limit contract bonds. As of December 2020, Sofimex’s business portfolio was composed of administrative sureties (87%), credit (6.2%), judicial (3.6%) and fidelity (3.2%).

Sofimex projects a gross written premium growth rate of 11% for 2022 while staying in line with its recent profitability metrics. AM Best believes that as one of Mexico’s largest surety underwriters, and with a good distribution network and disciplined underwriting, Sofimex has sufficient resources to maintain a stable stream of net income amid current market conditions.

Sofimex posted a sound underwriting performance in 2020, which has continued through September 2021. In 2020, the company’s claims, acquisition and operating expenses were well-contained, as reflected by a 50% combined ratio. The company’s operating performance metrics show very low volatility, a stable trend in premium sufficiency and compare well with the industry. Retention remained stable at 65%.

Sofimex’s risk-adjusted capitalization has remained at the strongest level, as measured by BCAR, and supportive of its ratings, even when stressed by possible losses from contingent claims. Furthermore, Sofimex has an appropriate reinsurance program with highly rated reinsurers and long-term business relationships.

Positive rating actions could occur if the company is able to maintain its current levels of premium sufficiency, increase profitability, and as a result, further strengthen its risk-adjusted capitalization. Negative rating actions could occur if underwriting performance deteriorates, if there is a significant increase in business risk due to a high concentration in the construction sector, or because of uncertainty with regard to the government’s infrastructure spending, which could impact the growth of the surety market.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Salvador Smith
Senior Financial Analyst

+52 55 1102 2720, ext. 109

[email protected]

Christopher Sharkey
Manager, Public Relations

+1 908 439 2200, ext. 5159

[email protected]

Eli Sanchez
Associate Director, Analytics

+52 55 1102 2720, ext. 108

[email protected]

Jim Peavy
Director, Communications

+1 908 439 2200, ext. 5644

[email protected]

Source: AM Best