Fitch Assigns IFS Rating of 'B' to Nacion Seguros; Outlook Stable

CHICAGO & SANTIAGO--()--Fitch Ratings has assigned a 'B' Insurer Financial Strength (IFS) rating to Nacion Seguros S.A. (Nacion Seguros). The Rating Outlook is Stable.

KEY RATING DRIVERS

Nacion Seguros S.A.'s rating reflects Fitch's expectation that the company would receive support from its parent, Banco de la Nacion Argentina (BNA), should the need arise. This view is a result of the insurance company's strategic importance to the banking group, high level of management and operational integration, and strong synergies with its parent. It also reflects the fact that any required support would be immaterial relative to the ability of BNA to provide it, given the relatively small size of the insurance operations. BNA is one of the largest banks in the country, and together with its insurance subsidiaries, plays an important social role while supporting the government's policies. Fitch rates Argentina's Long-Term Foreign Currency IDR at 'B'/Stable Outlook.

As of March 2016, Nacion Seguros' leverage (net liabilities/equity) reached 2.5x, which is lower than the Argentine industry average of 3.8x, partly reflecting its focus on short-term liabilities. Similarly, operating leverage (earned retained premiums/equity) is also relatively limited at 1.9x, reflecting the conservative policy of retaining total annual net income to strengthen the capital base.

The company focuses on insurance segments targeting the mass market, such as auto insurance and group life insurance, which, as of March 2016, represented 53% of written premiums, followed by technical and fire segments, which made up 34% of total written premiums. The company benefits significantly from its relationship with BNA, which has an extended branch network throughout the country.

Nacion Seguros posted positive results of ARS584 million as of March 2016, a 59% increase over the previous period. The positive net results were driven by the financial income earned on investments, reflected in a combined ratio of 102.1% and an operating ratio of 67.9%. As of March 2016, the entity exhibited a highly competitive return on both equity and assets of 51.4% and 14.4%, respectively.

Due to local regulations that restrict investments outside the country and in foreign currency, the investment portfolio is concentrated in local securities denominated in Argentine pesos. As of March 2016 the investment portfolio remains highly concentrated in government securities, which correlate its investment risk with Argentina's sovereign risk.

Nacion Seguros has a meaningful market share within the Argentine insurance industry, making up 2.8% of the premiums as of March 2016. The company is one of the leaders in auto, group life, fire, and technical insurance branches. In addition, the company benefits from the brand name of the parent locally, which supports its positioning in the industry.

As of March 2016, the company had ceded 32.7% of its premiums (primarily technical and fire insurance premiums) to Nacion Reaseguro S.A., presenting a maximum catastrophic loss severity limited at 0.2% of its capital. In Fitch's opinion the reinsurance coverage is adequate, though concentrated in only one reinsurer.

RATING SENSITIVITIES

The Outlook is Stable. Any changes in Fitch`s evaluation of BNA's capacity and/or its willingess to support Nacion Seguros, would result in changes to the insurer's ratings.

Additional information is available at 'www.fitchratings.com'

Applicable Criteria

Global Bank Rating Criteria (pub. 15 Jul 2016)

https://www.fitchratings.com/site/re/884135

Insurance Rating Methodology (pub. 17 May 2016)

https://www.fitchratings.com/site/re/881564

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1011103

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1011103

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Esin Celasun
Director
+55-21-4503-2626
Fitch Ratings Brasil Ltda.
Praca XV de Novembro, 20 - 401 B,
Rio de Janeiro, RJ, Brazil
or
Secondary Analyst
Santiago Recalde
Associate Director
+56-2-2499-3327
or
Committee Chairperson
James Auden
Managing Director
+1-312-368-3146
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Esin Celasun
Director
+55-21-4503-2626
Fitch Ratings Brasil Ltda.
Praca XV de Novembro, 20 - 401 B,
Rio de Janeiro, RJ, Brazil
or
Secondary Analyst
Santiago Recalde
Associate Director
+56-2-2499-3327
or
Committee Chairperson
James Auden
Managing Director
+1-312-368-3146
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com