Market Overview

A.M. Best Affirms Credit Ratings of HDI-Gerling de Mexico Seguros, S.A.


A.M. Best has affirmed the Financial Strength Rating (FSR) of A
(Excellent), the Long-Term Issuer Credit Rating (Long-Term ICR) of "a+"
and the Mexico National Scale Rating of "aaa.MX" of HDI-Gerling de
Mexico Seguros, S.A. (HDI-GM) (Mexico). The outlook of these
Credit Ratings (ratings) is stable.

The ratings reflect HDI-GM's balance sheet strength, which A.M. Best
categorizes as very strong, as well as its strong operating performance,
favorable business profile and appropriate enterprise risk management.

The ratings also reflect HDI-GM's substantial reinsurance support from
its group through HDI Global Network AG (formerly known as HDI-Gerling
Welt Service AG), which currently has an FSR of A (Excellent) and a
Long-Term ICR of "a+". Additionally, the ratings factor in HDI-GM's
integration with its ultimate parent company, HDI Haftpflichtverband der
Deutschen Industrie V.a.G. (HDI V.a.G.), in terms of the business model
and consistently provided financial support.

HDI-GM is a subsidiary of HDI Global Insurance Company (99.9%) and HDI
Global Network AG (0.1%), which are both subsidiaries of HDI V.a.G. As
of December 2017, the company's business portfolio was distributed
across fire (50%), liabilities (25%), marine (15%) and engineering risks
(10%). HDI-GM's business model consists of a very low premium retention
level, standing at 0.5% at year-end 2017, which is supported completely
by an automatic facultative reinsurance agreement provided by its
affiliate and minority shareholder, HDI Global Network AG.

The company's risk-adjusted capitalization is strong, as measured by
Best's Capital Adequacy Ratio (BCAR), and it has benefited from several
capital contributions from the group, aimed to support its growth and to
maintain adequate reserves and capital sufficiency. The last capital
contribution materialized in 2015.

HDI-GM's exposure to underwriting risks is limited through its
reinsurance agreement with HDI Global Network AG, which also renders
lower levels of required capital. However, large recoverables from
reinsurance are reflected in the assessment of its credit risk. A.M.
Best does not view this as a major concern given the counterparty's
excellent level of security and the binding characteristics of the
contract toward HDI-GM's obligations.

In 2017, the company reported negative bottom-line results as a result
of exchange currency losses, an increase in the loss ratio due to
non-recurrent events and volatility in its income statement derived from
its small premium retention level. Offsetting this vulnerability is the
support from its group through commissions received by ceded reinsurance
and by large reinsurance recoveries on claims.

A.M. Best expects HDI-GM's performance to remain stable with the support
provided by HDI V.a.G. and the binding characteristics of its
reinsurance contract. If there are positive rating actions on the main
operating subsidiaries of HDI/Talanx group as a result of a sustained
track record of improved underwriting performance across core business
segments, such as in the industrial lines and retail Germany divisions,
as well as a strengthening of risk-adjusted capitalization levels, the
global scale ratings on HDI-GM will move in tandem. Likewise, if there
are negative rating actions on HDI V.a.G. as a result of a marked
deterioration in operating performance or risk-adjusted capitalization,
the ratings on the Mexico subsidiary will mirror those actions.

This press release relates to Credit Ratings that have been published
on A.M. Best's website. For all 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
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Best's Credit Ratings
. For information on the proper media
use of Best's Credit Ratings and A.M. Best press releases, please view
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