Bangkok--1 Apr--Standard & Poor's
MEXICO CITY (Standard & Poor's) March 31, 2015--Standard & Poor's RatingsServices lowered its global scale financial strength rating (FSR) on AIGSeguros Mexico S.A. de C.V. (AIG Seguros) to 'A' from 'A+'. At the same time,we removed this rating from CreditWatch negative, where we placed it on Feb.18, 2015. In addition, we affirmed our national scale 'mxAAA' financialstrength rating on the company. The outlook on both ratings is stable. We alsoassigned a 'bbb' SACP to the company.
The global scale downgrade follows American Home Assurance's withdrawal of itsunconditional guarantee of all of AIG Seguros' obligations. American HomeAssurance is AIG's subsidiary.
The ratings on AIG Seguros reflect our view that the company is a"strategically important" subsidiary for AIG, which provides a three-notchuplift to the company's FSR. The SACP on AIG Seguros reflects its "fair"business risk profile due to its "adequate" competitive position, whichreflects the company's brand recognition, satisfactory gross operatingperformance, and small business scale. AIG Seguros' "upper adequate" financialrisk profile is based on solid capitalization ratios, limited exposure toforeign currency risk, and adequate portfolio diversification. On the otherhand, the insurer has weak earnings and it relies on capital injections fromits parent. AIG Seguros also has adequate financial flexibility thanks to theparent's reinsurance program and capital injections.
In our view, the company is "strategically important" to its ultimate parentcompany, given the support AIG provides to its Mexican subsidiary in the formof reinsurance capacity and a long track record of capital injections. Thesubsidiary's brand and strategy are integrated with the parent. In addition,Mexico is one of the markets that AIG intends to expand its operations,though, in our opinion this will take time to materialize.