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FOR IMMEDIATE RELEASE
MEXICO CITY - NOVEMBER 10, 2021 12:23 PM (EST)
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 reflect SG&T’s 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) (Cayman Islands).
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 (59%), accident & health (32%) and life (9%), as of December 2020. 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 (Cayman Islands), the non-operating holding company of the Grupo Financiero G&T Continental financial conglomerate. As of year-end 2020, GTC had operations in Guatemala, El Salvador and Panama.
AM Best views SG&T and AG&T’s business profiles 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 and AG&T’s operating performance as adequate. 2020 results for SG&T reflected limited claim activity due to pandemic-related restrictions on social mobility, helping net income to surpass its prior-year level. For 2021, there is a gradual recovery in revenue as well as in claims activity, resulting in technical performance similar to pre-pandemic levels. AM Best will continue to monitor the operating performance of SG&T 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. Performance in 2020 was as expected by AM Best amid a difficult year for business, albeit muted in terms of expected claims. As of August 2021, the surety business segment is experiencing a gradual recovery, with AG&T expanding at levels similar to the market but with a net income higher to the one reported in the same period last year.
The stable outlook on SG&T’s ratings reflects the technical capabilities of the company to maintain profitable underwriting and the steady prospects of revenue and claim experience into 2022.
The stable outlooks on AG&T 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 on 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.
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:
For SG&T only:
For AG&T only:
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.
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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.