Ratings Recap: InterGlobal, B&B Insurance, Grupo Nacional

A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of ‘B++’ (Good) and issuer credit rating of “bbb+” of UK-based InterGlobal Insurance Company Limited, both with stable outlooks. Best said the ratings reflect InterGlobal’s “solid level of risk-adjusted capitalization and good anticipated prospective operating performance. An offsetting factor is the company’s weak underwriting performance in the 2010 financial year.” However, Best also noted that “weak conditions during 2009 within the International Private Medical Insurance market have had a significant negative impact upon InterGlobal’s profitability in both the 2009 and 2010 financial years,” but Best anticipates that “underwriting results will return to more robust levels in 2011, driven by improving market conditions.” Best also pointed out that “successive growth in net premium income over recent years has eroded InterGlobal’s level of risk-adjusted capitalization. However, with a low level of investment risk and an excellent quality reinsurer panel, Best considers that the company’s level of risk-adjusted capitalization is likely to remain at a good level over the coming two years.”

A.M. Best Europe – Rating Services Limited has placed under review with developing implications the financial strength rating of ‘C’ (Weak) and issuer credit ratings of “ccc+” of B&B Insurance Co., OJSI, which is based in Belarus. The rating actions follow the announcement that “AXA Central & Eastern Europe, a subsidiary of France-based insurance and financial services provider, AXA S.A., has acquired 80 Percent of B&B, pending, amongst others, regulatory approvals, with a view to expanding its presence in Eastern Europe,” Best explained. The under review status with developing implications “reflects the potential benefits this could bring to the company whilst at the same time highlighting the fact B&B has been unable to provide any information surrounding the deal.”

A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating of “a” of Mexico’s Grupo Nacional Provincial, S.A. (GNP), both with negative outlooks. These ratings reflect GNP’s” leading position in the Mexican insurance market, its diversified business profile and historically profitable overall operating performance,” Best noted. The ratings also “reflect the company’s integral role within the group of companies owned by the Bailleres’ family, collectively known in Mexico as Grupo Bal. The outlook continues to reflect GNP’s elevated underwriting leverage for its current business profile, its inconsistent underwriting and overall earnings by segment in recent years and decreasing risk-adjusted capitalization measures. GNP is the largest domestic insurance company in Mexico as measured by direct premiums written. The company operates as a composite insurer of life and non-life business with core business segments in life, health and automobile coverage. GNP’s underwriting strategy and expense management have historically resulted in variable operating earnings by business segment. However, investment performance continues to be solid with a focus on asset liability matching techniques in order to minimize mismatch exposures, particularly in its life segment. Under Mexican regulations, insurance companies are required to maintain a risk manual that must identify potential risks and risk exposure limits, as well as policies and procedures for managing those risks.” Best added that it currently considers GNP’s risk management measures as “adequate. Although fully supportive of its current rating level, GNP’s risk-adjusted capitalization has trended downward as a result of inconsistent segment earnings and elevated underwriting leverage. In addition, GNP continues to report underwriting losses in key business segments and relies heavily on its investment income for its overall earnings.”