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

MEXICO CITY--(BUSINESS WIRE)--
AM Best has affirmed the Financial Strength Rating of A (Excellent), the Long-Term Issuer Credit Rating of “a” (Excellent) and the Mexico National Scale Rating of “aaa.MX” (Exceptional) of Grupo Nacional Provincial S.A.B. (GNP) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect GNP’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management.

GNP is the largest insurer in Mexico based on gross premium written (GPW). The company operates as a composite insurer of life and non-life business; core business segments include life, health and automobile coverage.

Dividend payments, driven by the company’s targets on capital efficiency, have partially restricted AM Best’s view of GNP’s risk-adjusted capitalization in the past, as measured by Best’s Capital Adequacy Ratio (BCAR). However, in recent years, GNP’s balance sheet strength has been very strong, having benefited from additional equity surplus due to changes in statutory accounting at year-end 2016, and positive bottom-line results during 2016-2020.

The additional equity surplus is a consequence of GNP implementing accounting measures based on market value approximations of assets and liabilities. GNP follows conservative practices in terms of its asset-liability management. In addition, the company’s balance sheet strength is reinforced by its good reinsurance program placed with highly rated counterparties, which protects the company’s risk retention adequately.

In 2020, GNP reported 7.2% growth in GPW, while maintaining profitable business in most of its core segments. Group life (6% of GPW) was the company’s only business line that generated a negative bottom line result. Overall, the company’s underwriting performance metrics were in line with historical trends, benefitting from a consistent flow of investment income. Policies were aligned to market changes, and the pricing model was improved to gain competitiveness and market share in low risk areas. As of September 2021, GNP is taking actions to mitigate the possible impact of the COVID-19 pandemic. The company continued to post adequate underwriting results, investment yield and net income of MXN 2.1 billion.

Positive rating actions are not expected in the medium term. Negative rating actions could take place if the company’s additional equity erodes with a sustained negative operating performance, or if the amount of dividends paid negatively impacts the company’s risk-adjusted capitalization to a level that is no longer supportive of the current rating levels.

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 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.

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Olga Rubo, FRM

Financial Analyst

+52 55 1102 2720, ext. 134

[email protected]

Salvador Smith
Senior Financial Analyst

+52 55 1102 2720, ext. 109

[email protected]

Christopher Sharkey
Manager, Public Relations

+1 908 439 2200, ext. 5159

[email protected]

Jim Peavy
Director, Communications

+1 908 439 2200, ext. 5644

[email protected]

Source: AM Best