Mexico, September 13, 2012 -- Moody's has affirmed Fianzas Monterrey, S.A.
(Monterrey)'s Baa1 global local currency (GLC) insurance financial
strength (IFS) rating. In addition, Moody's de México
affirmed Monterrey's Aa1.mx national scale IFS rating.
The outlook of both ratings remains stable. This rating action
follows the 12 September announcement of the planned sale of Fianzas Monterrey
by New York Life Insurance Company to ACE Limited (ACE INA Holdings A3/stable
senior debt guarnteed by ACE Limited). The sale is subject to regulatory
approvals and is expected to be completed during the first quarter of
2013.
RATINGS RATIONALE
Moody's said the rating affirmation reflects Fianzas Monterrey's
strong business and financial profile, including the company's
leading position in the Mexican surety industry, as well as its
stable and robust profitability.
José Montaño, Moody's analyst commented:
"Monterrey has maintained a significant presence in the Mexican
surety market, and has improved its underwriting systems and internal
controls which have continued to strengthen its financial performance".
These credit strengths are constrained by the limited business and product
diversification of Monterrey given its monoline nature.
In addition, the company's investment portfolio is heavily
concentrated in Mexican government bonds (rated Baa1, stable outlook).
Monterrey's rating also takes into consideration Mexico's
operating environment -- in particular, Moody's
assessment of the country's economic and institutional strength
and susceptibility to event risk, as well as the extent of development
of the country's insurance sector, relative to other countries
worldwide.
Although Monterrey had been a wholly-owned subsidiary of New York
Life (Aaa IFS rating, stable outlook) for about 11 years,
Monterrey's Baa1 IFS rating did not receive any uplift from its
stand-alone credit profile due to the ownership by New York Life.
This is because Moody's believed the surety business was not core
to the parent company's life and retirement services business strategy.
On the other hand, ACE Limited has had a presence in the Mexican
property & casualty insurance industry for several years and its acquisition
of Monterrey will complement its operations in the country. In
addition, Fianzas Monterrey has historically ceded a large percentage
of its premiums to reinsurers, and in general, ACE has often
provided significant reinsurance support to its international subsidiaries
internally.
Fianzas Monterrey's Aa1.mx national scale IFS rating is based
on the application of Moody's mapping criteria for a Baa1 global local
currency rating to the Mexican national scale.
The rating agency said that the following factors could contribute to
a rating upgrade for Monterrey: 1) an improvement in the company's
business diversification (particularly given the anticipated potential
changes to Mexico's regulatory framework for surety and credit insurers);
2) an upgrade in Mexico's sovereign rating or improvement in the
country's operating environment; and 3) potential explicit
and implicit support by the new parent company, ACE Limited,
upon closing of the acquisition.
The factors that could cause a rating downgrade include the following:
1) a sustained deterioration in the company's market share;
2) a weakening of its underwriting performance (e.g. combined
ratio sustained above 90%) or gross underwriting leverage (e.g.
to 2.5x or greater); or 3) a downgrade in Mexico's sovereign
rating or a deterioration in Mexico's operating environment.
The principal methodology used in this rating was Moody's Global Rating
Methodology for Property and Casualty Insurers, published in May
2010. Please see the Credit Policy page on www.moodys.co.mx
for a copy of this methodology.
Moody's National Scale Ratings (NSRs) are intended as relative measures
of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale ratings in that they are not globally
comparable with the full universe of Moody's rated entities, but
only with NSRs for other rated debt issues and issuers within the same
country. NSRs are designated by a ".nn" country
modifier signifying the relevant country, as in ".mx"
for Mexico. For further information on Moody's approach to national
scale ratings, please refer to Moody's Rating Methodology published
in March 2011 entitled "Mapping Moody's National Scale Ratings to
Global Scale Ratings".
Based in Mexico City, Fianzas Monterrey reported net income of Mx$
177 million and gross premiums written of Mx$ 814 million for the
first six months of 2012. The company reported total assets of
Mx$ 3.4 billion and shareholders' equity of Mx$
1.4 billion as of 30 June 2012.
The date of the last Credit Rating Action on Fianzas Monterrey was 10
Mar 2011 when Moody's Investors Service assigned the company's IFS
ratings for the first time.
The period of time covered in the financial information used to determine
Fianzas Monterrey rating is between 31 December 2006 and 30 June 2012
(source: Moody's, Issuer's financial statements and CNSF).
The sources and items of information used to determine the ratings include
2011 interim financial statements (source: Fianzas Monterrey);
year-end 2011 audited financial statements (source: Fianzas
Monterrey, audited by PricewaterhouseCoopers, S.C.)
financial statements and information on market position (source:
CNSF).
Additional information on Rating Symbols and Definitions, issuer,
lead analyst, ratings history, etc. can be found in
Moody's local website www.moodys.com.mx.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.mx.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.mx.
A general listing of the sources of information used in the rating process,
and the structure and voting process for the rating committees responsible
for the assignment and monitoring of ratings can be found in the Disclosure
tab in www.moodys.com.mx.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
Please see Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com.mx for further information
on the meaning of each rating category and the definition of default and
recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com.mx
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's provides a date that it believes is
the most reliable and accurate based on the information that is available
to it. Please see the ratings disclosure page on our website www.moodys.com.mx
for further information.
Please see www.moodys.com.mx for any updates on changes
to the lead rating analyst and to the Moody's legal entity that
has issued the rating.
The ratings issued by Moody's de Mexico are opinions regarding the
credit quality of securities and/or their issuers and not a recommendation
to invest in any such security and/or issuer.
Jose Angel Montano
Asst Vice President - Analyst
Financial Institutions Group
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 001-888-779-5833
SUBSCRIBERS:52-55-1253-5700
Robert Riegel
MD - Insurance
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 001-888-779-5833
SUBSCRIBERS:52-55-1253-5700
Moody's affirms Fianzas Monterrey's Baa1/Aa1.mx IFS rating following announced sale to ACE Ltd.
