Best’s News & Research Service - July 24, 2019 09:32 AM (EDT)
AM Best Affirms Credit Ratings of Ocaso, S.A. Seguros y Reaseguros
- July 24, 2019 09:32 AM (EDT)
London //BestWire// - AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” of Ocaso, S.A. Seguros y Reaseguros (Ocaso) (Spain). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Ocaso’s balance sheet strength, which AM Best categorises as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
Ocaso’s balance sheet strength assessment is underpinned by risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), at the strongest level. The assessment factors in Ocaso’s excellent liquidity, limited dependence on reinsurance and the absence of financial leverage. A partially offsetting factor is the increased concentration within the investment portfolio towards Italian sovereign debt, which at year-end 2018 accounted for 18.4% (2017: 8.8%) of total investments at fair value.
Ocaso has a track record of solid operating earnings, supported by resilient technical results. Although in recent times returns have moderated slightly as a result of the ongoing impact of a regulatory requirement to strengthen reserves for legacy funeral expense business (“decesos”), the company has achieved a strong consolidated five-year (2014-2018) weighted average combined ratio of 82.9%. Prospective results will be affected by these reserving requirements over the medium term, but are expected to remain strong overall, supported by the company’s rigorous underwriting discipline.
Ocaso maintains a well-established competitive position in Spain, where it benefits from a recognised brand and a broad distribution network. The company deploys a highly defensive strategy in its core decesos segment, in which it has a strong competitive standing with a very stable customer base. Approximately 97% of Ocaso’s underwriting revenue was sourced from the domestic market in 2018. Although this high concentration of business in Spain is a potential source of earnings volatility, Ocaso has demonstrated its ability to produce resilient results, even during periods of recession.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all 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. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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