OREANDA-NEWS. Fitch Ratings has assigned Afianzadora Insurgentes, S. A. de C. V, Grupo Financiero Aserta (Insurgentes) an Insurer Financial Strength (IFS) rating of 'BBB-' and a National Scale IFS rating of 'AA-'. The Rating Outlook for both ratings is Stable.

KEY RATING DRIVERS

Insurgentes is a subsidiary of Grupo Financiero Aserta, S. A. de C. V. (GFAserta), which also owns Afianzadora Aserta, S. A. de C. V. (Aserta) and a life insurance company. Combined, the two surety bond companies represent 98% of GFAserta's total assets, defining the group's overall credit profile. GFAserta is responsible for the losses and liabilities of its subsidiaries, according to its Convenio Unico de Responsabilidades.

Insurgentes is the fifth-largest of a total of 15 companies, boasting a market share of 8.1% as of December 2015. GFAserta's strategy utilizes its subsidiaries' technical advantages by having the surety bond company that generates the greatest benefits for the group underwrite the business. The group's two surety bond companies have a combined market share of 26%.

While the company's leverage metrics are slightly higher than the sector's local and regional averages, Fitch believes that these are adequate, as the pressure on capital is generated by Mexican regulations, which call for ample provisioning.

The company's efficiency levels, measured through its operating (71.6%) and loss ratios (12.4%), have remained stable and competitive as of June'16, although results have been pressured by administrative expenses. Risk cumulus remain high but under control, representing 20% of the capital by surety bond, and 98% by group, although they are mitigated through reinsurance contracts.

With a five-year average of 50%, the proportion of Insurgentes' investments held in government instruments is slightly lower than the sector's 57.9%. The investments backing reserves comprise government instruments (85%) and shares of adequate credit quality (15%).

Insurgentes' reserves over net earned premiums ratio is higher than the local and regional averages, due to the stringent regulatory requirements in Mexico, as well as the company's conservative policy.

Insurgentes' reinsurance program is ample and includes contracts with companies of high credit quality, as 35% of its premiums written are reinsured with its sister company. The risk exposure retained by the company is a high 10.4% for its main product but similar to the regional average for the sector.

RATING SENSITIVITIES

An improvement in Insurgentes' rating would be associated with lower leverage ratios and lower equity exposures, along with adequate and ample profitability ratios sustained over time. Furthermore, a downgrade would be triggered by higher leverage ratios and a sustained deterioration in the company's technical profitability. Likewise, an upgrade or downgrade of Insurgentes' ratings would be triggered by a change in Fitch's perception of GFAserta's credit quality, which is driven by the two surety bond companies that make up the group.