A.M. Best Affirms Credit Ratings of Insignia Life S.A. de C.V.

A.M. Best has affirmed the Financial Strength Rating of B+ (Good), the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb-” and the Mexico National Scale Rating of “aa-.MX” of Insignia Life S.A. de C.V. (Insignia) (Mexico). The outlook of these Credit Ratings (ratings) is positive.

The ratings reflect Insignia’s balance sheet strength, which A.M. Best categorizes as adequate, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

Insignia’s enhanced risk-adjusted capitalization, improving operating performance, continued support from its holding company and a highly experienced management team, as well as ongoing improvements in ERM support the current ratings. Offsetting these positive rating factors is the company’s relatively small size within Mexico’s life insurance industry.

Insignia initiated operations in Mexico in 2008. The company underwrites individual and group life insurance. Insignia operates through a commercial network of more than 3,000 agents and 12 offices in more than 10 of the principal cities in Mexico.

Insignia’s risk-adjusted capitalization follows an improving trend, as measured by Best’s Capital Adequacy Ratio (BCAR), reflecting shareholder commitment to support the company’s growth strategy while maintaining adequate capitalization. In 2015, it was A.M. Best’s view that the insurer’s risk-based capital was pressured due to a material real estate investment and negative bottom-line results. Insignia’s holding company made several capital injections in the total amount of MXN 59.4 million in 2015 to address the real estate investment and to support the company’s growth. In 2016, risk-adjusted capitalization improved due to a MXN 33 million infusion, coupled with the implementation of Solvency II-type regulation effects. Risk-adjusted capitalization further strengthened in 2017 as a result of the sale of the real estate asset, a MXN 23 million contribution and MXN 63 million in positive bottom-line results. However, A.M. Best expects Insignia to further improve risk-adjusted capitalization metrics through proper management of intangibles in order to avoid pressures in capital.

As a result of Insignia’s rapid premium expansion, the company historically has relied heavily on its holding company to maintain sound capitalization levels through capital infusions. With the sale of the real estate investment, and positive bottom-line results at year-end 2017, such dependency on the holding company has diminished but still prevails.

The company’s investment strategy continues to be conservative and provides a steady flow of revenues to back its operating results. Underwriting practices are sound and in line with its industry peers. Furthermore, Insignia´s return on assets of 3.4% is characterized by a materially improving trend driven by positive bottom-line results in 2017.

A.M. Best expects Insignia to strengthen its ERM framework through ongoing improvements involving systems updates, an embedded value tool and an internal economic capital model.

Key factors that could lead to positive rating actions for Insignia include material improvement of risk-based capital metrics, good underwriting results that translate into sound profitability ratios and reducing its dependence on capital injections by its holding company. Key factors that could lead to negative rating actions include substantial deterioration in capitalization, as measured by Best’s Capital Adequacy Model, in a short period of time, or diminished capital support from its holding company, as well as deviations from A.M. Best’s expectation of the company’s improving operating performance.

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 Oct. 13, 2017)
• Available Capital and Holding Company Analysis (Version Oct 13, 2017)
• Evaluating Country Risk (Version Oct. 13, 2017)
• Understanding Universal BCAR (Version Oct. 13, 2017)

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.

• Previous Rating Date: Feb. 24, 2017
• Date of Financial Data Used: Dec. 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.

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