A.M. Best Affirms Credit Ratings of Grupo Nacional Provincial, S.A.B.

MEXICO CITY--()--A.M. Best has affirmed the Financial Strength Rating of A- (Excellent), the Long-Term Issuer Credit Rating of “a-” and the Mexico National Scale Rating of “aa+.MX” of Grupo Nacional Provincial, S.A.B. (GNP) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) remains positive.

The outlook and rating affirmations reflect GNP’s improved risk-adjusted capitalization derived from regulatory changes, as well as its leading position in Mexico’s insurance market, strong enterprise risk management practices, profitable results and well-structured reinsurance program. Limiting the ratings is the volatility that the equity surplus may experience derived from regulatory changes and the elevated underwriting leverage to stockholders’ equity.

GNP is the largest domestic capital insurer within Mexico based on premiums. The company operates as a composite insurer of life and non-life business; core business segments include life, health and automobile coverage.

GNP’s risk-adjusted capitalization is very strong and the positive outlook reflects the expected improvement of its additional equity surplus derived from regulatory changes in statutory accounting; however, there is still some degree of uncertainty over how this surplus will still be reflected on the final capital position of the company in the medium term. The additional surplus reported in equity is a consequence of the implementation of accounting registers based on market value approximations of assets and liabilities. This benefits the capital position of GNP, which already follows conservative practices in terms of assets and liabilities management. In addition, the company’s balance sheet strength is reinforced by its good reinsurance program, which adequately protects the company’s risk retention and is placed among highly rated counterparties.

During 2015, GNP’s growth outpaced the market while the company maintained a profitable business based on its core segments. Given the strong competition in Mexico’ insurance market and the ongoing low interest rate environment, the bottom line results and profitability metrics from the company experienced a reduction compared with the previous year. As of August 2016, the company continued to post adequate underwriting results, investment yield and profitability.

Positive rating actions could take place if the company is able to maintain its current level of risk-adjusted capitalization in the medium term while improving its bottom line results and profitability indicators to levels more in line with its more highly rated peers. Negative rating actions could take place if the company erodes its additional equity with a sustained negative operating performance or if the amount of dividends paid negatively impacts risk-adjusted capitalization to a level that is no longer supportive of the current rating levels.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

  • A.M. Best’s Ratings on a National Scale (Version Sept. 5, 2014)
  • Catastrophe Analysis in A.M. Best Ratings (Version Nov. 3, 2011)
  • Evaluating Country Risk (Version May 2, 2012)
  • Rating Members of Insurance Groups (Version Dec. 15, 2014)
  • Risk Management and the Rating Process for Insurance Companies (Version April 2, 2013)
  • Understanding Universal BCAR (Version April 28, 2018)

View a general description of the policies and procedures used to determine credit ratings. Also in accordance with Mexican regulations, the following is a link to required disclosures – A.M. Best America Latina Supplementary Disclosure. For information on the structure, voting and the committee process for determining the ratings and monitoring activities please refer to “Understanding Best’s Credit Ratings.”

  • Previous Rating Date: July 22, 2015
  • Date of Financial Data Used: Aug. 31, 2016

This press release relates to rating(s) that have been published on A.M. Best's website. For additional rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.

A.M. Best does not validate or certify the information provided by the client in order to issue a credit rating.

While the information obtained from the material source(s) is believed to be reliable, its accuracy is not guaranteed. A.M. Best does not audit the company’s financial records or statements, or otherwise independently verify the accuracy and reliability of the information; therefore, A.M. Best cannot attest as to the accuracy of the information provided.

A.M. Best’s credit ratings are independent and objective opinions, not statements of fact. A.M. Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. A.M. Best’s credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions. View our entire notice for complete details.

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Copyright © 2016 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Elí Sánchez, +52 55 1102 2720, ext. 108
Senior Financial Analyst
eli.sanchez@ambest.com
or
Christopher Sharkey, +1 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Alfonso Novelo, +52 55 1102 2720, ext. 107
Director of Analytics
alfonso.novelo@ambest.com
or
Jim Peavy, +1 908-439-2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best
Elí Sánchez, +52 55 1102 2720, ext. 108
Senior Financial Analyst
eli.sanchez@ambest.com
or
Christopher Sharkey, +1 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Alfonso Novelo, +52 55 1102 2720, ext. 107
Director of Analytics
alfonso.novelo@ambest.com
or
Jim Peavy, +1 908-439-2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com