AM Best Affirms Credit Ratings of Atradius Seguros de Crédito, S.A.

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

Atradius Mexico is a member of the Atradius group, which on a consolidated basis has a balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

The ratings also reflect Atradius Mexico's strategic importance to the overall Atradius group, given its leading position within the credit insurance segment in Mexico, its importance as a gateway to Latin America's insurance markets, good financial flexibility derived from its strong capitalization, supportive reinsurance provided by the group and its seasoned management team. These positive rating factors are offset partially by volatility in the company's net income due to the intrinsic volatility in the credit insurance market.

The company benefits from its integration within the Atradius group, which allows it to leverage operations on the same practices and procedures, reinsurance, draft facilities and underwriting selection. In addition, its ERM practices show a high level of integration to Atradius N.V.

Atradius Mexico offers credit insurance in its domestic market and was ranked as Mexico's largest credit insurer as of December 2019. The three largest participants in this line of business hold more than 92% of the market share.

Even though the company's bottom line was pressured by an unrealized capital loss in 2018, driven by Atradius Mexico's exposure to an Exchange Traded Fund tracking the Mexico Stock Exchange, and an increase of 40% in claims in 2019, Atradius Mexico's financial performance compares favorably with that of its peers in Mexico's credit insurance industry. This positive performance also has been reflected historically by better-than-average loss ratios, due to the company's underwriting and collection practices. Amid the pandemic environment, Atradius Mexico consistently has generated profitable results, as reflected in a combined ratio below 100% and a return on equity of 6.7% as of third-quarter 2020. AM Best expects Atradius Mexico's profitability to continue and rely mainly on the company's sound underwriting and expense control practices, as well as the high amount of commissions received by reinsurance that translate into negative acquisition costs and its consistent financial product, which leverages on the company's long position in U.S. dollars.

Atradius Mexico's capitalization, as measured by Best's Capital Adequacy Ratio (BCAR) on a consolidated basis, was maintained at the strongest level, and as a result, the company maintains significant financial flexibility. Furthermore, AM Best expects the company to sustain its capitalization level. Atradius Mexico's reinsurance program is placed with Atradius Reinsurance Designated Activity Company, further demonstrating the support received by the group.

If there are positive rating actions on the main operating subsidiaries of Atradius N.V., as a result of a change in the key rating fundamentals of Atradius N.V.'s parent company, Grupo Catalana Occidente, S.A., the ratings of Atradius Mexico likely would move in tandem. Likewise, if there are negative rating actions on the Atradius group, as a result of a sustained decline in operating performance or a sustained and material deterioration in Atradius N.V.'s consolidated risk-adjusted capitalization, the ratings of Atradius Mexico would mirror those same actions.

A change in AM Best's perception regarding the actual or perceived level of strategic importance of Atradius Mexico to the Atradius group of companies also could impact the company's ratings.

This press release relates to Credit Ratings that have been published on AM 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 AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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