GRUPO NACIONAL PROVINCIAL, S. A. B.
BOARD OF DIRECTORS ANNUAL REPORT TO THE SHAREHOLDERS MEETING FOR 2017
Dear Shareholders,
In my capacity as Chairman of the Board of Directors of Grupo Nacional Provincial, S.A.B. (GNP), it is my pleasure to present you with the following report based on the analysis of the information provided by the Chief Executive Officer in his Annual Report on the company’s performance, the results obtained and the highlights of the fiscal year 2017, as well as the main activities of the Board of Directors.
2017 put the union and solidarity of the Mexican people to the test against the strong and terrible earthquakes that shook Mexico City and several interior states on September 7 and 19. The efforts and dedication on the part of every Mexican to help those most affected is indisputable proof that Mexico is great because of the human quality of its people.
GNP Seguros, a 100% Mexican company, looks for different ways to support the people most affected by these events; to help the victims, it opened a collection center together with the Mexican Red Cross, which was able to distribute over 12 tons of aid, mainly to the states of Puebla, Oaxaca and Morelos; for policyholders, it absorbed the cost of the deductable and responded swiftly to more than 12,000 claims as a result of the earthquakes. In addition, GNP joined other Grupo BAL companies to form a fund of 120 million pesos to rebuild public schools.
The occurrance of these events shows the immense social value given to the nation by the insurance industry in protecting the assets of families and companies. Unfortunately, the insurance penetration rate remains low, and these events unnecessarily cause painful property losses.
During the year, the Mexican economy was subject to high financial volatility, mainly, the behavior of the exchange rate and increased inflation, as well as suffering a hike in interest rates. Nevertheless, the economy grew by 2.3% and just over 800,000 jobs were created in the formal sector. National insurance industry premiums grew by 10.7%.
The total volume of premiums issued by GNP was 55.89 billion pesos, the performance of Life, Auto and Group Medical Expenses being particularly noteworthy, with a nominal growth of 24.3%, 9.9% and 6.5%, respectively, compared to the previous year. With this dynamic, GNP maintained its position as the second largest insurer in the country.
The company has followed a strategy based on careful pricing and risk underwriting, on a methodical control of expenses and claims costs, and a prudent policy of reinsurance and investment of reserves.
Net profits grew almost 26% compared to 2016, reaching 2.669 billion pesos. The solvency margin grew by 19.7% to reach 4.402 billion pesos.
Our strategy has enabled us to substantially improve the company’s profit rate to 17.6% of invested capital, while notably improving the quality of the service to our policyholders. These results keep us at the forefront of the biggest and most profitable multiline company in the market.
The rating agencies AM BEST and Standard & Poor´s gave us their highest ratings for the Mexican market (“aa+MX” and “mxAAA”, respectively), as a reflection of the highest solvency margin in the history of GNP.
In 2017, we distributed the sum of 1.376 billion pesos in dividends.
Moreover, GNP continues to receive affirmative feedback on the attributes that qualify us as a Socially Responsible Company.
Our “Vivir es Increíble” campaign this year promoted the reflection “We can all choose how to live.”
According to the opinion of our internal and external auditors, and the review of the Audit and Corporate Practices Committee, our accounting policies and criteria are appropriate and sufficient. The Chief Executive Officer’s report presented to the Shareholders Meeting is a reasonable reflection of the company’s financial situation and results.
Based on established policies, the performance of senior officials is reviewed annually. Every increase in salary and benefits must be authorized by the Nomination, Evaluation and Compensation Committee. Salaries are increased annually, and bonuses are determined based on the results of the performance reviews. The remuneration package for senior officials consists of a base salary, mandatory benefits and other benefits.
The Board of Directors approved the company’s strategic plan and reviewed and ratified the decisions of the Executive Committee. Furthermore, the Board reviewed and approved the company’s periodical financial statements presented during the 2017 fiscal year, as well as the results and actions of its affiliates.
The Board of Directors adheres to solid corporate governance practices. To carry out its duties, the Board relies on the support of the committees suggested by the Code of Best Corporate Practices, which perform the recommended tasks.
The Board of Directors presents, for the consideration of this Shareholders Meeting, the report that lays out and explains the accounting policies and criteria used to prepare the Financial Statements including, among other items, the basis for presentation, consolidation and important accounting policies, and which were audited by external auditors and are an integral part of this Report.
In the opinion of the Board of Directors, the Chief Executive Officer’s Report presented to this Shareholders Meeting reasonably reflects the financial situation, the results obtained and the highlights of the company’s performance during 2017.
Dear Shareholders,
I would like to reiterate my gratitude to all members of the Board of Directors, Committee members and the Executive Committee for their valuable support. I thank our shareholders for their confidence and, of course, wish to acknowledge our collaborators for their commitment and contribution to the results obtained.
Alberto Baillères
CHAIRMAN OF THE BOARD OF DIRECTORS
GRUPO NACIONAL PROVINCIAL, S.A.B.