A.M. Best has assigned a financial strength rating of B+ (Good), an issuer credit rating of “bbb-” and a Mexico National Scale Rating of “a-.MX” to Insignia Life S.A. de C.V. (Insignia) (Mexico). The outlook assigned to all ratings is stable.

The ratings reflect Insignia’s adequate risk-adjusted capitalization, conservative investment strategy, strong support from its holding company and an experienced and recognized board of management. Offsetting these positive rating factors are the company’s relatively small size within Mexico’s life insurance industry, weak but improving operating performance and the challenges arising from the fast premium growth strategy required to reach a business volume that adequately supports the company’s expense structure.

Insignia initiated operations in Mexico in 2008. The company underwrites individual (77%), group (8%) and collective (15%) life insurance. Insignia operates through a commercial network of 2,700 agents and 13 offices in more than 10 cities in Mexico.

Insignia’s risk-adjusted capitalization is adequate, as measured by Best’s Capital Adequacy Ratio (BCAR), reflecting shareholder commitment to support this growth strategy and maintain an adequately capitalized company. During 2015, A.M. Best’s view on the insurer’s risk-based capital was pressured as a result of negative bottom line results and a material real estate investment to establish company headquarters. In order to address this investment, in addition to supporting growth, Insignia’s holding company has made three capital injections in the total amount of MXN 52.4 million (approximately USD 3.2 million) in 2015 with a final and additional one expected by the end of the year.

As a result of Insignia’s rapid expansion in terms of premiums, it relies importantly on its holding company to maintain sound capitalization levels through capital infusions. Underwriting practices are sound and in line with its industry, with a materially improving trend in terms of acquisition and operating expenses in relation to its net earned premiums. Taking this into account, along with management’s lengthy experience and strong capability, A.M. Best expects the company to achieve a break-even point in the short to medium term. The company’s investment policies are conservative and in line with local regulatory guidelines and have provided a steady flow of revenues to back its operating results.

Key rating drivers that could lead to positive rating actions for Insignia include improved and sustained underwriting results that translate into sound profitability ratios, reducing its dependence on capital injections by its holding company. In addition, sustained improvements in risk-based capital could lead to positive rating actions. Key factors that could lead to negative rating actions include diminished support from its holding company in terms of capital, as well as deviations from A.M. Best’s expectations for 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
  • Evaluating Country Risk
  • Insurance Holding Company and Debt Ratings
  • Risk Management and the Rating Process for Insurance Companies
  • Understanding Universal BCAR

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: Not rated
  • Date of Financial Data Used: September 30, 2015

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