A.M. Best Assigns Ratings to Assurant Daños México, S.A. and Assurant Vida México, S.A.

A.M. Best has assigned a financial strength rating (FSR) of B++ (Good), an issuer credit rating (ICR) of “bbb+” and a Mexico National Scale Rating of “aa-.MX” to Assurant Daños México, S.A. (ADM) (Mexico City, Mexico). At the same time, A.M. Best has also assigned a FSR of B++ (Good), an ICR of “bbb+” and a Mexico National Scale Rating of “aa-.MX” to Assurant Vida México, S.A. (AVM) (Mexico City, Mexico). The outlook assigned to all ratings is stable.

The ratings for ADM and AVM reflect their affiliation and strategic importance to Assurant Inc. as a stepping stone to grow in the Latin America market and good levels of risk-adjusted capitalization. The ratings also consider the strong reinsurance structure mainly supported by the group with the remainder placed among counterparties that have solid security levels and adequate operating performance. Partially offsetting these positive rating factors are the small market share of both companies that results in volatile operating performance, and higher than market average growth strategy that could put pressure on the capitalization of both subsidiaries within their respective segments.

ADM and AVM initiated operations in 2004 and are owned by Assurant Holding Mexico, S. de R.L. de C.V. (AHM), which is part of Assurant Inc., the subsidiaries’ ultimate parent. As of 2014, ADM ranked 27th in Mexico’s property and casualty (P/C) segment, while AVM ranked 21st within the life segment. Distribution channels for both companies are based on cross sales with financial institutions, auto companies and telecom carriers, among others.

ADM and AVM follow their group’s underwriting, enterprise risk management and corporate governance practices, and receive reinsurance support and benefit from its brand recognition in order to expand their market share in Mexico. Both subsidiaries also benefit from their group’s capital contributions, whenever required, in support of growth targets.

ADM has maintained adequate levels of risk-adjusted capitalization, despite historically volatile underwriting results. Its capital base deteriorated in 2014, affected mainly by negative bottom lines results from increased expenses due the company expanding its specialty insurance portfolio into other P/C lines of business. During 2015, ADM’s reduction in premium retention, in conjunction with efforts to enhance its operational cost efficiency, generated improvements in both acquisition and operating expense ratios, and resulted in positive profitability with a return on assets of 0.4% and a 1.7% return on equity.

AVM also maintains adequate levels of risk-adjusted capitalization. During 2014, the risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), strengthened as a result of approximately MXN 12.9 million in capital injections and finally achieved positive bottom line results. This trend was maintained through 2015, which A.M. Best expects to continue, therefore reducing AVM’s dependence on capital injections from its group.

Negative rating actions will occur if A.M. Best’s views on parental support or strategic importance to its group for both subsidiaries deteriorate.

Factors that could lead to positive rating actions for ADM include less volatile underwriting results that are reflected in a more stable operating performance, which translate into improvements in its capital adequacy ratios, as measured by BCAR. Additional negative rating actions could take place if sustained deterioration of operating performance or aggressive growth in premiums lead to a drop in capitalization to levels no longer supportive of the current ratings.

Positive rating factors that could lead to an upgrade for AVM include sustained improvements in underwriting results that continue to strengthen its capital base and reduce its dependence on capital support from its group. Negative ratings factors that could result in a downgrade include a material deterioration in underwriting performance that results in a decline in risk-based capitalization.

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
• Catastrophe Analysis in A.M. Best Ratings
• Evaluating Country Risk
• Insurance Holding Company and Debt Ratings
• Rating Members of Insurance Groups
• 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: December 31, 2015

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.

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