AM Best Affirms Credit Ratings of Sompo Seguros Mexico, S.A. de C.V.

AM Best has affirmed the Financial Strength Rating of A+ (Superior), the Long-Term Issuer Credit Rating of “aa-” (Superior) and the Mexico National Scale Rating of “aaa.MX” (Exceptional) of Sompo Seguros Mexico, S.A. de C.V. (Sompo Mexico) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) is stable.

Sompo Mexico is a subsidiary of Sompo America Insurance Company (SAIC) and a member of Sompo International Holdings Ltd. (SIH). Sompo Japan Insurance Inc. (SJ) is the core operating unit of SOMPO Holdings, Inc. (SOMPO Holdings), the ultimate parent and one of the largest non-life insurance groups in Japan. Sompo Mexico is well-integrated into the group.

The ratings reflect SJ’s balance sheet strength on a consolidated basis, which AM Best assesses as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

The ratings recognize Sompo Mexico’s integration and support from SIH and SJ, through SAIC, which provides synergies and operating efficiencies to the Mexico subsidiary. Sompo Mexico maintains the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Partially offsetting these positive rating factors is the company’s small market share, even though its combined ratio and profitability levels compare well with the industry.

Sompo Mexico initiated business in 1998; the company underwrites property/casualty business and stands as a strategic hub from which SIH planned to expand operations in Latin America, however, the current strategy is to focus on growing inside the Mexico market. Although the company’s business portfolio historically has been composed mainly of referred businesses from SJ, its interest and participation in its domestic market have increased recently.

Sompo Mexico’s risk-adjusted capitalization is supported by a solid reinsurance program and small retention profile, as well as 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 business for the Mexico operations of SJ’s global clients, and commissions from a diversified reinsurance program with highly rated reinsurers, which includes Endurance Specialty Insurance Ltd. (a subsidiary of SJ) as the program leader. In addition, the company’s conservative investment policies provide a steady flow of revenues in support of net income.

In 2023, Sompo Mexico achieved positive bottom-line results through profitable underwriting, which were strengthened further by investment income; the company posted a return-on-equity ratio of 4.9%. The company benefits from being integrated into SIH, gaining operational leverage through the same systems, procedures, and ERM practices.

Rating actions taken on SJ will most likely result in equivalent rating actions for Sompo Mexico unless AM Best determines that the strategic importance of the Mexico subsidiary to SJ has decreased. Negative rating actions could occur if there is material deterioration in risk-adjusted capitalization, such as substantial investment losses caused by capital market volatility or large-scale natural catastrophes. Negative rating actions also could occur if there is persistent and significant deterioration in operating performance stemming from weak underwriting and investment results. Positive rating actions could occur if the company demonstrates sustained improvement in its balance sheet strength metrics including its risk-adjusted capitalization and financial leverage.

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 Performance Assessments, 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.

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