Best Affirms FSR for Mexican Insurer

August 2, 2005

A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) of Afianzadora Insurgentes SA de C.V. (Mexico City, Mexico) (AISA). The rating outlook is stable.

The rating reflects AISA’s strengthened capitalization, disciplined underwriting program and significant market share of Mexican surety business. The rating also recognizes the benefits AISA receives from its ultimate parent, The St. Paul Travelers Companies Inc. (St. Paul Travelers) (St. Paul, Minn.), which includes both financial as well as underwriting and risk control support.

AISA management anticipates operating performance to improve through newly established risk selection procedures and the discontinuance of certain unprofitable lines of business. In addition, the company has undertaken significant restructuring efforts to lower its expense ratio and has shifted its business strategy from seeking increased market share to improving operating performance.

AISA’s balance sheet is well supported by a conservative investment portfolio, which consists of relatively safe, liquid instruments such as government securities and higher quality corporate bonds. AISA investment strategy is to achieve a stable, low-risk return on investments to support its loss reserve position. Risk-based capitalization has improved, as the company has received both a substantial capital infusion and reinsurance protection from its parent company.

Offsetting these factors is AISA’s substantial reserve strengthening charge in 2004 for adverse development in surety lines of business.

Furthermore, the company has historically experienced volatility in operating results due to both claim payments and a relatively high expense structure.

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