AM Best Affirms Credit Ratings of Seguros G&T, S.A. and Afianzadora G&T, S.A.

MEXICO CITY--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” (Excellent) of Seguros G&T, S.A. (SG&T) (Guatemala). AM Best also has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” (Excellent) of Afianzadora G&T, S.A. (AG&T) (Guatemala). The outlook of these Credit Ratings (ratings) is stable.

The ratings of SG&T reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The ratings of AG&T reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. The ratings of AG&T also recognize its affiliation and importance to SG&T and GTC Investments, Ltd. (GTC).

SG&T was established in 1947 and is the second-largest insurer in Guatemala, with a market share of 14%. Its product portfolio is composed mainly of property/casualty (61.5%), accident & health (29.5%) and life (9%), as of December 2021. The company holds very competitive positions across most lines within Guatemala’s insurance industry due to its permanence and brand recognition. AG&T was established in 1977 as the sister company of SG&T to underwrite surety business separately from other insurance operations.

SG&T and AG&T are privately owned by GTC, the non-operating holding company of the Grupo Financiero G&T Continental financial conglomerate.

AM Best views SG&T’s and AG&T’s business profile as neutral, based on the companies’ top market position, their brand recognition and experienced management. AM Best’s stable market segment outlook on Guatemala’s insurance industry recognizes the macroeconomic fundamentals of the country, which helped limit the negative impact of the economic downturn on premium growth, claims and investments. The companies’ technical and managerial capabilities continue to support its strategy, mainly in core segments like individual motor and the health business.

AM Best assesses SG&T’s balance sheet strength as strongest, due to its capacity to protect its balance sheet as reflected in AM Best’s risk-adjusted capitalization assessment; these factors are driven by a comprehensive reinsurance program, conservative investment portfolio and appropriate asset liability management practices. AG&T derives its very strong assessment on capitalization the same way as its sister company but remains limited by the size of its capital. Both companies report consistently profitable results, which are reflected in their growing capital base. Despite being subject to dividend payments, AG&T’s asset base has a conservative risk profile.

AM Best considers SG&T’s and AG&T’s operating performance as adequate. SG&T’s technical result for year-end 2021 remained positive although halved from the past year. Nevertheless, a higher investment income and greater dynamism in other income coming from rights of issuance of premiums has allowed the company to report a net profit of USD 20 million, down from USD 23 million in 2020. The adequate assessment also considers the efforts done by the company to continue creating savings and efficiencies in expenses while aiming to improve underwriting quality. AM Best will continue to monitor SG&T’s operating performance, as a gradual return to normalcy continues to evolve in Guatemala.

The surety company’s business profile benefits from the ceded premium commissions derived from its reinsurance agreement with SG&T, which has benefited both companies since being implemented. As of December 2021, the company maintained good bottom line results of USD 4.4 million in comparison with USD 2.7 million in the previous year. AM Best believes growth will continue to be managed within the company’s risk appetite while it continues to post positive bottom line results.

The stable outlooks for SG&T’s ratings reflect the technical capabilities of the company to maintain profitable underwriting and the steady prospects of revenue and claim experience into 2022.

The stable outlooks for AG&T’s ratings are derived from the company’s very strong level of balance sheet strength and conservative underwriting. The importance of the reinsurance program limits income volatility and facilitates a more balanced operating performance.

Positive rating actions are not expected for SG&T in the short term, as the economic cycle continues to evolve. Negative rating actions could occur if its operating performance deteriorates as a result of pressures in the quality of underwriting or from a downturn in the economic cycle.

AM Best does not foresee positive rating actions for AG&T in the short term. However, an improved and sustained operating performance that results in a larger capital base in the intermediate term could improve AM Best's view with regard to AG&T’s capitalization. Negative rating actions could result from a substantial change in the reinsurance program that increases risk taking to levels not matching AM Best's assessment for the company’s risk-adjusted capitalization. The ratings also could be affected negatively if AM Best’s view regarding support from SG&T or the group diminishes.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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