Fitch Assigns IFS Rating of 'B' to Nacion Seguros de Retiro

Fitch Ratings has assigned a 'B' Insurer Financial Strength (IFS) rating to Nacion Seguros de Retiro S.A. (Nacion Retiro). The Rating Outlook is Stable.

KEY RATING DRIVERS

Nacion Retiro's IFS rating reflects Fitch's expectation that the company would receive support from its parent, Banco de la Nacion Argentina (BNA), should the need arise. This view is a result of the insurance company's strategic importance to the banking group, high level of management and operational integration, and strong synergies with its parent. It also reflects that any required support would be immaterial to the ability of BNA to provide it, given the relatively small size of the insurance operations. BNA is a state-owned bank and its operations are guaranteed by the Argentinian Government. It is one of the largest banks in the country, and together with its insurance subsidiaries, plays an important social role and supports the government policies. Fitch rates Argentina's Long-Term Foreign Currency IDR at 'B'/Stable Outlook.

While Nacion Retiro is required by local regulation to be a segmented business, BNA's insurance subsidiaries have a complementary business structure with a multisegment focus. Excluding the reinsurance business, BNA's insurance subsidiaries had gross written premiums (GWPs) market share of 3% as of march 2016, being one of the leading insurers in a highly granular industry. Nacion Retiro also has a strong market position in the retirement and savings lines, concentrating 9.7% of GWP and 8.5% of total reserves in the segment.

The bulk of the entity's reserve volume remains concentrated in annuities reserves (51.1% of technical reserves as of March 2016), managing an annuities run-off generated prior to the 2008 private pension system reform. Currently, Nacion Retiro's GWPs are focused on group saving lines for retirement, which, in Fitch's opinion could grow by double digits in the short- to medium-term, but has a narrow scope due to the aversion of the Argentine population for long-term saving in the domestic market.

The company concentrates the majority of its assets in financial investments (97% of total assets as of March 2016), adequately diversified and with reasonable liquidity. However, the bulk of the investments are exposed to Argentinean government bonds, which are considered to be of relatively high risk.

Nacion Retiro's profitability ratios posted solid growth in the last four years, supported by the positive trend in financial income mainly reflecting the country's high inflation rate. The company's major profitability ratios remained higher compared to its regional and local peers, reporting annualized ROAA of 2.9% and ROAE of 35.2% in March 2016. In Fitch's opinion, the small cost base and improving efficiency ratios of the company are positive for its financial flexibility, which is required for a primary run-off business.

RATING SENSITIVITIES

The Outlook is Stable. Any changes in Fitch's evaluation of BNA's capacity and/or its willingness to support Nacion Retiro would result in changes to the insurer's ratings.

Additional information available at 'www.fitchratings.com'

Applicable Criteria

Global Bank Rating Criteria (pub. 15 Jul 2016)

https://www.fitchratings.com/site/re/884135

Insurance Rating Methodology (pub. 17 May 2016)

https://www.fitchratings.com/site/re/881564

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1011080

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1011080

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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