AM Best has assigned a Financial Strength Rating (FSR) of A- (Excellent) and a Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” to Seguros G&T, S.A. (SG&T) (Guatemala). AM Best also has assigned an FSR of A- (Excellent) and a Long-Term ICR of “a-” to Afianzadora G&T, S.A. (AG&T) (Guatemala). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect SG&T’s balance sheet strength, which AM Best categorizes 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 categorizes 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 Grupo G&T.
SG&T, which was established in 1947, is the second-largest insurer in Guatemala, with a market share of 16%. Its product portfolio is composed mainly of property/casualty (61%), accident & health (30%) and life (9%), as of December 2019. The company holds very competitive positions across most lines within Guatemala’s insurance industry due to its permanence and brand recognition. AG&T, established in 1977, is the sister company that SG&T created to underwrite surety business separately from other insurance operations.
SG&T and AG&T are privately owned by GTC Investments, Ltd (GTC) (Cayman Islands, 2013), the non-operating holding company of the Grupo Financiero G&T Continental financial conglomerate. As of year-end 2019, GTC had operations in Guatemala, Salvador, Panama and Costa Rica.
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 that growth prospects have become limited due to the effects of the COVID-19 pandemic, but that macroeconomic fundamentals provide stability to the system to mitigate the pandemic’s potential impact on claims and investments. The companies’ customer profiles have helped in collecting and managing business effectively amid the changed operating environment brought on by the COVID-19 pandemic crisis.
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 is limited by the size of its capital. Both companies report consistently profitable results, which are reflected in a growing capital base. Despite being subject to dividend payments, the company’s asset base has a conservative risk profile.
AM Best considers SG&T and AG&T’s operating performance as adequate. In the insurance company adjustments in underwriting and a shift towards profitability instead of business, volume has resulted in better technical results, enhanced in 2020 by lower claims frequency due to pandemic-related restrictions on social mobility.
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. AM Best acknowledges that 2020 will be a difficult year for business, albeit muted in terms of expected claims, and will continue to monitor events that could harm claim costs given the company’s exposure to catastrophe events.
The stable outlook on SG&T’s ratings is driven by the company’s technology-driven strategy that is backed by well-protected balance sheet amid a challenging 2021, due to the expectation of more normalized claims frequency with limited business prospects.
The stable outlook on AG&T is derived from the company's very strong level of balance sheet strength and cautious underwriting. The importance of the reinsurance program limits income volatility and facilitates a more balanced operating performance during times of economic recession.
Positive rating actions could take place for SG&T if the company's favorable trend in operating performance continues improving amid the evolving business cycle while maintaining its strongest level of risk-adjusted capitalization. Negative rating actions could occur if SG&T’s operating performance deteriorates as a result of pressures in the quality of underwriting or by insufficient business generation.
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.
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