Best’s News & Research Service - March 10, 2022 10:17 AM (EST)
AM Best Affirms Credit Ratings of AVLA Perú Compañía de Seguros S.A.
- March 10, 2022 10:17 AM (EST)
Mexico City //BestWire// - AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of AVLA Perú Compañía de Seguros S.A. (AVLAP) (Lima, Peru). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect AVLAP’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
AVLAP is a Peru-based property/casualty insurer that began operations in 2015. It specializes in surety, with complimentary lines of credit insurance and engineering, and ranks eighth among non-life carriers in Peru and second in the country’s surety segment, based on market share.
AM Best views AVLAP’s business profile as neutral. Since its creation in 2015, AVLAP has capitalized successfully on Peru’s guarantee market, which has limited capacity, and become one of the country’s main participants for credit insurance and surety. During 2021, the company continued expanding its business as Peru’s economy recovered and the COVID-19 pandemic became more manageable, but the ongoing revival of Peru’s economy still leaves room for execution risk. AM Best’s neutral assessment of the company’s business profile is hindered by the small size of its operation within a small segment in Peru, which currently is in Country Risk Tier 3, per AM Best’s country risk evaluation.
AM Best considers the company’s operating performance to be adequate. AVLAP has been able to promote its products in a profitable manner and maintain adequate underwriting performance since 2017 and into 2021; however, the operation remains small and needs to converge to an adequate and less volatile cost structure, for which adjustments are taking place at a group level. AVLAP’s operating performance has been complemented by an active investment strategy that generated good investment results in 2021.
AVLAP’s balance sheet assessment is very strong given its solid capital base for the risks it undertakes, as reflected in its strongest risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio. The very strong assessment also recognizes the company’s capital management capabilities and the willingness and proven history of capital contributions made by its shareholders to support AVLAP’s growth. A panel of reinsurers supports balance sheet strength level with excellent security. Limiting the ratings is the potential pressure of the high financial leverage present in its ultimate parent company, AVLA S.A.
The stable outlooks reflects AM Best’s expectation that the company will continue to adjust to the improving market conditions profitably while maintaining sound capitalization.
Negative rating actions could take place if there are significant capital outflows to AVLAP’s holding company, AVLA S.A., that weaken AVLAP’s risk-adjusted capitalization to a level that no longer supports the current rating.
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:
- Evaluating Country Risk (Version Oct. 13, 2017)
- Understanding Global BCAR (Version July 22, 2021)
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- Rating Surety Companies (Version April 07, 2021)
- Scoring and Assessing Innovation (March 5, 2020)
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.
- Previous Rating Date: February 5, 2021.
- Date Range of Financial Data Used: December 31, 2015-December 31, 2021
This press release relates to rating(s) that have been published on AM Best’s website. For additional rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page.
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