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 SPP Institución de Seguros, S.A. de C.V. (SPP Seguros) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect SPP Seguros’ balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The ratings also reflect the company’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), evidence of capital support from the main shareholder and prudent investment practices. Limiting SPP Seguros’ ratings is the inherent risk of a new company implementing its business plan, the expansion risk arising from its new property/casualty (P/C) segments, and the volatility of the prospective underwriting portfolio.

SPP Seguros is a Mexico-based company that began operations in 2019. The main shareholder is Juan Carlos Merlo, who has an ownership stake of 51%; and the rest of the shares are held by Global Insurance Group Holding Company, Inc., a San Antonio, TX-domiciled entity that owns several insurance-related businesses.

SPP Seguros is focused on guaranteeing quality in construction and providing protection against unforeseen events and accidents. As of December 2023, the company’s business portfolio was composed almost entirely of P/C business (99.7%) with 0.3% in personal accident coverage. Within Mexico’s market, SPP Seguros has a market share of less than 1%.

As of 2024, the company is seeking authorization to underwrite the business lines of civil liability and professional risks, marine and transport, fire, agricultural, animal and catastrophe risks, and auto. SPP Seguros intends to expand its range of offerings to the market and cover additional insurance needs.

SPP Seguros’ risk-adjusted capitalization is at the strongest level, as measured by BCAR, with underwriting risk standing as the main component for required capital. Support from SPP Seguros’ main shareholder has been reflected in capital injections to back up its growth and provide financial flexibility. Overall, the company’s balance sheet is strong, but it is subject to volatility derived from its net business portfolio distribution and growth.

As of year-end 2023, SPP Seguros’ gross written premium stood at MXN 73.6 million, and it had a combined ratio of 74.7%. The positive bottom-line results also continued into May 2024. SPP Seguros’ investment income has been stable, and its investment profile is expected to remain the same in the coming years, supporting its income generation.

Factors that could lead to positive rating actions include continued growth of the company’s capital base in the medium term, supportive of the current level of risk-adjusted capitalization, as measured by BCAR, and successful consolidation of the company’s business strategy in targeted locations. Negative rating actions could occur if premium growth or adverse development of the underwriting portfolio erodes the company’s capital base and reduces risk-adjusted capitalization to a level that no longer supports the ratings.

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