AM Best has revised the outlooks to stable from positive and 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 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 stable outlooks point to the company's ability to maintain profitable results while implementing its internalization strategy.

Qualitas' operation is characterized by its strong risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), sustained premium sufficiency and profitability metrics, the company's consistent leading position in Mexico's auto insurance segment and its strong distribution network.

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 market share of approximately 30% in a highly competitive market. Qualitas differentiates from its competitors in the auto insurance sector through strong name-brand recognition and its ability to adjust pricing and fees successfully, which helped the company surpass its premium growth targets in 2022. The company expects premium growth to be stable in the near to medium term, underpinned by a rebound in auto sales and tourism, among other sectors, as economic activity resumes in the country.

While Qualitas' risk-adjusted capitalization has strengthened over time due to its sound net results and reduced exposure to equities in its investment portfolio, it is still susceptible to variations driven by significant dividend payments. AM Best will continue to monitor the effects on the company's balance sheet. At the same time the shift in the company's risk profile, in addition to the short tenor of its investments and a proper matching in currencies, affords Qualitas 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, even in the wake of a sharp decline in auto sales and significant increase in auto-related claims 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 take place if Qualitas is able to maintain a stable trend of improved risk-adjusted capitalization and sustained profitable results. 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:

Best's National Scale Ratings (Version June 15, 2023)

Available Capital and Holding Company Analysis (Version Oct. 13, 2017)

Evaluating Country Risk (Version May 4, 2023)

Understanding Global BCAR (Version July 6, 2023)

Scoring and Assessing Innovation (Version Feb. 27, 2023)

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, relevant sources of information and the frequency for updating ratings, please refer to Guide to Best's Credit Ratings.

Previous Rating Date: July 15, 2022

Initial Rating Date: Oct. 20, 2010

Date Range of Financial Data Used: Dec. 31, 2017-March 31, 2023

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