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Fitch Upgrades Seguros Inbursa to 'BBB+'; Outlook Stable
July 6, 2015 / 5:13 PM / 2 years ago

Fitch Upgrades Seguros Inbursa to 'BBB+'; Outlook Stable

(The following statement was released by the rating agency) MONTERREY, July 06 (Fitch) Fitch Ratings has upgraded Seguros Inbursa, S.A. Grupo Financiero Inbursa's Local Currency Insurer Financial Strength (IFS) rating to 'BBB+' from 'BBB' and affirmed its national scale IFS rating at 'AAA(mex)'. The Outlook for both ratings remains Stable. KEY RATING DRIVERS The upgrade of Seguros Inbursa, S.A. (Seguros Inbursa) is based on Fitch's opinion of Grupo Financiero Inbursa (GFInbursa). Seguros Inbursa's rating is based on legal explicit support given by its holding group GFInbursa, which, according to Mexico's Law to Rule Financial Groups, the holding, if required, will grant unlimited support for its subsidiaries' losses. Fitch considers GFInbursa's credit quality similar to its main subsidiary, Banco Inbursa, S.A., Institucion de Banca Multiple (BInbursa), which is rated 'BBB+' with a Stable Outlook. Previously, Seguros Inbursa's rating was based on its standalone financial profile. Fitch changed its approach to the rating because it believes the enhanced credit quality of GFInbursa results in an uplift of the overall credit quality for Seguros Inbursa. From now on Seguros Inbursa's rating will be derived from the credit worthiness of GFInbursa and the strategic importance of Seguros Inbursa within the Group. Fitch also acknowledges that there is a low likelihood of a change on the strategic importance of the Insurance business for the group given the complementary nature of operations for insurance and banking activities. Inbursa is the fifth largest insurer in Mexico with a market share of 6.6% in terms of premiums written as of December 2014. The company benefits from underwriting the largest biannual non-life insurance policy in Mexico for Petroleos Mexicanos (Pemex), which represents 23% of its overall premium portfolio. However, its weight within retained premiums is reduced, as 95% of the risks covered by this policy are reinsured. As of December 2014, Seguros Inbursa's equity/assets ratio was similar to the sector's average of 14%, and it exceeded the minimum capital requirement by local regulation by 34%. This implies Seguros Inbursa has sufficient equity in addition to technical reserves to meet its obligations with policyholders in the event of non-expected deviations in various risks. Also, the company reflects a stabilization trend in its operating leverage ratio (retained premiums/equity of 5.39x), which is well below the sector's average of 7.09x. Seguros Inbursa experienced a reduction of its operating profitability in 2014, measured by its combined ratio of 110% (December 2013: 103%) mainly attributed to a hike in losses caused by Odile Hurricane. However, Fitch believes Seguros Inbursa's profitability benefits from the good performance of its claims ratios, relative stability of expense ratios and high investment revenues. The company's stringent technical and catastrophic provisioning policies, combined with the breakdown and retention levels of the company's premium portfolio, led to ample coverage of adjusted technical reserves over retained risks (2.9x) as of December 2014. This is similar to the sector's average of 3.1x. Seguros Inbursa's extensive reinsurance protection leads the company's equity to exposures lower than 5.4% for simple or catastrophic events. RATING SENSITIVITIES Seguros Inbursa's rating is aligned to GFInbursa financial profile, whose credit quality is considered by Fitch as similar to its core operative subsidiary; BInbursa, based on legal explicit support given by GFInbursa trough Unique Responsibilities Agreement. FULL LIST OF RATING ACTIONS Fitch has taken the following rating actions on Seguros Inbursa, S.A., Grupo Financiero Inbursa: --IFS upgraded to 'BBB+' from 'BBB'; --National IFS affirmed at 'AAA(mex)'. The Rating Outlook is Stable. Contact: Primary Analyst Eugenia Martinez Associate Director +5281 8399 9155 Fitch Ratings Mexico Prol. Alfonso Reyes 2612, Piso 8, Monterrey NL, 64920 Secondary Analyst Milena Carrizosa Director + 571 307 5180 ext 1090 Committee Chairperson Franklin Santarelli Managing Director +1-212 908 0739 Media Relations: Alyssa Castelli, New York, Tel: +1 (212) 908 0540, Email: alyssa.castelli@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 04 Sep 2014) here Additional Disclosures <a href="https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame. cfm?pr_id=987476">Dodd-Frank Rating Information Disclosure Form Solicitation Status here <a href="https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context =2&detail=31">Endorsement Policy ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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