AM Best


A.M. Best Revises Outlook to Positive for Grupo Nacional Provincial, S.A.B. and Assigns Mexico National Scale Rating


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Elí Sánchez
Financial Analyst
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eli.sanchez@ambest.com

Alfonso Novelo
Director, Analytics
+(52) 55-1102-2720, ext. 107
alfonso.novelo@ambest.com
Christopher Sharkey
Manager, Public Relations
(908) 439-2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

MEXICO CITY - JULY 22, 2015 02:17 PM (EDT)
A.M. Best has revised the outlook to positive from stable, affirmed the financial strength rating of A- (Excellent), an issuer credit rating of "a-" and assigned a Mexico National Scale Rating of "aa+.MX" to Grupo Nacional Provincial, S.A.B. (GNP) (Mexico City, Mexico). The outlook assigned for the Mexico National Scale Rating is positive.

The revised outlook and rating affirmations reflect GNP's leading position in Mexico's insurance market, profitable overall operating performance, good reinsurance program, solid risk-adjusted capitalization and potential increases in reported surplus derived from upcoming changes in statutory accounting in line with the company's conservative asset liability management. Limiting the ratings is the elevated underwriting leverage to stockholders' equity and the challenging competitive environment in the Mexican market.

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

During 2014, GNP was able to produce positive bottom line results by improving its underwriting policies and targeting profitable business, especially in property/casualty and the accidents & health business, despite the underwriting performance in its group life segment. While the company's growth rate was similar to 2013, profitability measures have deteriorated due to the combined effects of slight increases in claims, operating expenses and reserve strengthening. The company consistently reports combined ratios close to 100%. This is in conjunction with a steady flow of investment revenue resulting from its conservative investment strategy, which has allowed GNP to maintain positive bottom line results in each of the past five years.

GNP's risk-adjusted capitalization is supportive of its current rating level. However, A.M. Best expects the company's capitalization level to improve based on upcoming accounting and regulatory changes in Mexico. This expectation is based on the implementation of improved market value approximations of assets and liabilities within a company that 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.

While the company presents high net underwriting leverage to surplus, when compared to its closest competitors, A.M. Best expects this measure will partially decrease as a result of the aforementioned accounting changes, and through the strengthening of its underwriting practices, which should lead to improved profitability in 2015 and beyond. However, the latter will prove challenging, given the strong competitive dynamics of the Mexican market, especially in personal lines.

Positive rating actions could arise from a sustained improvement of GNP's underwriting and profitability ratios over the next two years, while maintaining strong capitalization levels as measured by Best's Capital Adequacy Ratio. Negative rating actions could occur if the capitalization trends downward to a level that no longer supports the current ratings, either from deterioration in its underwriting performance or aggressive changes in dividend payout practices.

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

  • Catastrophe Analysis in A.M. Best Ratings

  • Evaluating Country Risk

  • Evaluating Non-Insurance Ultimate Parents

  • Risk Management and the Rating Process for Insurance Companies

  • Understanding Universal BCAR

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.


  • Previous Rating Date: Jun. 27, 2014

  • Date of Financial Data Used: Mar. 31, 2015

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 visit A.M. Best's Ratings & Criteria Center.

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