Best’s News & Research Service - December 15, 2022 11:48 AM (EST)
AM Best Affirms Credit Ratings of Grupo Nacional Provincial S.A.B.
- December 15, 2022 11:48 AM (EST)
Mexico City //BestWire// - 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 assessed as very strong, having benefited from additional equity surplus due to changes in statutory accounting at year-end 2016, and positive bottom-line results during 2016-2021.
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 2021, GNP reported 8.1% growth in GPW, while maintaining profitable business in most of its core segments. Auto (17% of GPW) was the business line that contributed the most to the positive bottom-line result. Aside from the increase in claims, the company’s underwriting performance metrics did not present material deviations with respect to historical trends, still benefiting from a consistent flow of investment income. Policies were aligned to market changes, and the company’s pricing model was improved to gain competitiveness and market share in low risk areas. As of September 2022, GNP is taking actions to mitigate the impacts of the COVID-19 pandemic and the currently challenging economic environment. The company continued to post adequate underwriting results, investment yield and net income of MXN 2.1 billion in the nine-month 2022 period.
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.
The methodology used in determining these ratings is Best’s Credit Rating Methodology (Version Nov. 13, 2020), which provides a comprehensive explanation of AM 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:
- Evaluating Country Risk (Version Oct. 13, 2017)
- Understanding Global BCAR (Version June 30, 2022)
- Catastrophe Analysis in AM Best Ratings (Version Oct. 13, 2017)
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- Scoring and Assessing Innovation (Version March 5, 2020)
View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, please refer to Guide to Best’s Credit Ratings.
- Previous Rating Date: Dec. 9, 2021
- Date Range of Financial Data Used: Dec. 31, 2015-Sept. 30, 2022
This press release relates to rating(s) that have been published on AM 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 AM Best’s Recent Rating Activity web page.
AM 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. AM Best does not audit the company’s financial records or statements, or otherwise independently verify the accuracy and reliability of the information; therefore, AM Best cannot attest as to the accuracy of the information provided.
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