AM Best has affirmed the Financial Strength Rating of B+ (Good), the Long-Term Issuer Credit Rating of 'bbb-' (Good) and the Mexico National Scale Rating of 'aa-.MX' (Superior) of Qualitas Compania de Seguros S.A. de C.V. (Qualitas) (Mexico City, Mexico).
The outlook of these Credit Ratings (ratings) is positive.
The ratings reflect Qualitas' balance sheet strength, which AM Best assesses as adequate, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The positive outlooks reflect Qualitas' continued improvement in risk-adjusted capitalization, which if maintained, should result in enhanced balance sheet strength driven by positive bottom-line results.
Qualitas' balance sheet strength is underpinned by its strengthened risk-adjusted capitalization, sustained premium sufficiency and profitability metrics, the company's consistent leading position in Mexico's auto insurance segment and its strong distribution network. Partially offsetting these positive rating factors are the adverse conditions present in Mexico's economy and financial markets, mainly the large contraction in new car sales and the compromised quality and liquidity of securities in the country.
Qualitas has established a strong distribution capability across Mexico through its network of local agents, financial institutions and service offices. This has enabled the company to maintain its leading market position in Mexico's auto insurance segment and achieve a 32% market share amid challenging competitive conditions. Qualitas differentiates from the rest of its competitors in the auto insurance sector by its market recognition and ability to make adjustments in pricing and fees successfully, achieving to surpass its premium growth targets in 2021. The company expects premium growth to be stable in the near and medium term, underpinned in its business capabilities, applied to the sectors of car sales and tourism, among others, as the economic activity reactivates in the country.
Qualitas' risk-adjusted capitalization has strengthened over time due to its sound net results and reduced exposure to equities in its investment portfolio. AM Best will continue to monitor the effects on the company's balance sheet, derived from the developments in its domestic financial markets. Nevertheless, the shift in its risk profile, in addition to the short tenor of its investments and a proper matching in currencies, provides the company with financial flexibility to react in the best interest of its capital position.
The strong assessment of Qualitas' operating performance is supported by its capacity to maintain premium sufficiency levels over the past six years, adjust prices and manage claims even in the wake of a sharp decline in car sales, amid a challenging period for Mexico's economy. Qualitas' claim management and market presence, in addition with controlled administrative expenses and underwriting, provide the company with the necessary tools to maintain a profitable profile.
Positive rating actions could occur in the near to medium term if Qualitas is able to maintain a stable trend of improved risk-adjusted capitalization, sustained in profitable results and a risk profile that continues to reflect a lower exposure to riskier assets. Negative rating actions could occur if Qualitas' operating performance deteriorates to a point no longer supportive of the strong assessment, due to adverse market conditions or changes in underwriting. Negative rating actions also could take place should risk-adjusted capitalization deteriorate below current levels, due to capital outflows or lower available capital to face risks.
The methodology used in determining these ratings is Best's Credit Rating Methodology (Version Nov. 13, 2020), which provides a comprehensive explanation of AM 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:
AM Best's Ratings On a National Scale (Version Oct. 13, 2017)
Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
Catastrophe Analysis in A.M. Best Ratings (Version Oct. 13, 2017)
Evaluating Country Risk (Version Oct. 13, 2017)
Understanding Global BCAR (Version June 30, 2022)
Scoring and Assessing Innovation (Version March 5, 2020)
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 Guide to Best's Credit Ratings.
Previous Rating Date: July 9, 2021
Date Range of Financial Data Used: Dec. 31, 2016-March 31, 2022
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QUALITAS LIMITED 
