A.M. Best has assigned a Financial Strength Rating of A- (Excellent), a Long-Term Issuer Credit Rating of "a-" and the Mexico National Scale Rating of "aaa.MX" to Stewart Title Guaranty de México, S.A. de C.V. (STGM) (Mexico). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect STGM's balance sheet strength, which A.M. Best categorizes as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management. Offsetting these positive factors are the company's small size in Mexico's insurance industry and its concentration in a single line of business.
STGM is a subsidiary of Stewart Title Guaranty Company (STGC), located in Houston, Texas. Through its subsidiaries, STGC offers its products, in addition to Mexico, in the United States, the European Union, Australia, Costa Rica and China. Given the specialized nature of the title product and the institutional strategy, STGM's sales efforts are focused on business referred by the parent company on existing customers, which generates a reduced number of policies per year in a Mexican market consisting of just two participants.
According to Best's Capital Adequacy Ratio, STGM's capitalization is strong, with an upward trend in capital and surplus growth during the past five years, mainly driven by consistent positive bottom-line results, with underwriting risk being the main component for required capital. Support from STGC has been reflected in the past through capital injections directed to help strengthen the business when required.
The operating performance of STGM has been positive in the past four years, which mainly can be attributed to the optimization of the business strategy that was carried out in 2012-2013. This allowed STGM to reduce costs through a variable cost scheme. However, the company is exposed to foreign exchange risk, as a big part of the investment portfolio is in U.S. currency, and volatility, due to its small size.
Positive rating actions on STGM could occur if the company continues to produce strong technical results while maintaining excellent risk-adjusted capitalization. Negative rating actions could occur if risk-adjusted capitalization was considered to be at a level unsupportive of the current ratings, or if A.M. Best determines that the strategic importance of the Mexico subsidiary to its group has decreased.
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:
- Evaluating Country Risk (Version Oct. 13, 2017)
- Rating Title Insurance Companies (Version Oct. 13, 2017)
- Understanding Universal BCAR (Version Oct. 13, 2017)
- A.M. Best's Ratings On a National Scale (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: Not Rated
- Date of Financial Data Used: Sept. 30, 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.
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