Afianzadora Insurgentes SA de CV's CPA Rtd BBB by S&P.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 10/6/97--Standard & Poor's today assigned its triple-'B' claims-paying ability and counterparty Counterparty The other participant, including intermediaries, in a swap or contract. credit ratings to Afianzadora Insurgentes S.A. de C.V. The outlook on the counterparty credit rating is stable. The rating reflects Afianzadora Insurgentes' market leadership, the benefits from its recent acquisition by USF&G Corp. (parent of United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Fidelity & Guaranty As a verb, to agree to be responsible for the payment of another's debt or the performance of another's duty, liability, or obligation if that person does not perform as he or she is legally obligated to do; to assume the responsibility of a guarantor; to warrant. Co., single-'A' claims-paying ability) and its own satisfactory capitalization and operating performance. MAJOR RATINGS FACTORS: Prospects for strong revenue growth and increased market share are good. The insurer is the leading writer of fidelity and surety bonds surety bond An insurance fee required before a duplicate security is issued to replace one that has been lost. The fee is approximately 4% of the market value of the security to be replaced. in Mexico, with a market share of 31%. There are 20 other monoline surety companies in Mexico. Afianzadora Insurgentes has the most extensive distribution network, and its next largest competitor has a 16% market share. The large volume of business related to performance bonds in the construction sector exposes the sector to volatility in revenues, but Afianzadora Insurgentes' market share is higher than prior to the 1994 Mexican peso devaluation devaluation, decreasing the value of one nation's currency relative to gold or the currencies of other nations. It is usually undertaken as a means of correcting a deficit in the balance of payments. . The construction industry has been recovering and grew by 10% during the second quarter of 1997. Standard & Poor's believes the new parent company, USF&G, will bring additional financial and underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. management to complement Afianzadora Insurgentes' strong management team. There is an excellent strategic fit as USF&G has one of the world's largest surety operations, and its surety business has been a consistent performer. Net income is satisfactory given the premium volatility in the Mexican surety market. Income from operations improved during the first half of 1997, but did not compensate for the declining yield on investments as inflation moderated. The insurer generated 161 million pesos (US$19 million) in net earned premiums Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. , with net income of 44.3 million pesos (US$6 million), which is 27.5% of net premiums. The quality of earnings has improved as an accounting change reports only actual, not anticipated, claims recovered as part of income. Investment practices are appropriate to the risks that Afianzadora Insurgentes underwrites. The insurer holds a short-term and very liquid portfolio of assets to back its technical and contingency reserves. At year-end 1996, the company had U.S. dollar-denominated assets of $21 million, in part to cover reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. reserves. Adjusted capitalization (including contingency reserves but excluding unrealized gains Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. on real estate) of 371 million pesos (US$49 million) at year-end 1996 is solid. This represented a capital redundancy of 131 million pesos (US$17 million) as measured by the Mexican regulatory solvency margin. The quality of capital is good, benefiting from the accelerated write-off of unrecoverable claims from "bond debtors". EXPECTATIONS/OUTLOOK: STABLE Premiums adjusted for inflation will increase by at least 10%. The return on revenue for 1997 will decrease, with the results closer to the levels of the 1992-1994 period, which averaged about 23%. Capital redundancy as measured by the solvency margin will decline with real premium growth, but remain satisfactory, Standard & Poor's said. -- CreditWire CONTACT: Shelly A Harris, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of (1) 212-208-1548 For more information on criteria or subscriptions: http://www.ratings.standardpoor.com |
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