Best’s News & Research Service - January 31, 2020 11:51 AM (EST)
AM Best Affirms Credit Ratings of AVLA Perú Compañía de Seguros S.A.
- January 31, 2020 11:51 AM (EST)
Mexico City //BestWire// - AM Best has affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” of AVLA Perú Compañía de Seguros S.A. (AVLAP) (Lima, Peru). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect AVLAP’s balance sheet strength, which AM Best categorizes as 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 No. 8 among non-life carriers in Peru and No. 2 in the country’s surety market.
AM Best views AVLAP’s business profile as neutral. Since its creation in 2015, AVLAP has been able to capitalize on a guarantee market with limited capacity in Peru successfully, becoming one of the main participants for credit insurance and surety, but current development of its niche market still leaves room for implementation risk. In AM Best’s view, this is mitigated partially by the successful implementation to date of its business plan. Additionally, AM Best’s assessment of the company’s business profile is limited by the small size of the 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 despite its recent creation. AVLAP has been able to promote its products in a profitable manner and maintain adequate underwriting metrics since 2017; 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. Operating performance and balance sheet strength are supported strongly by a panel of reinsurers with excellent security.
AVLAP’s balance sheet assessment is strong given its solid capital base for the risks it undertakes, as reflected in its strong risk-adjusted capitalization. The strong assessment also recognizes the willingness and proven history of capital contributions made by its shareholders to support AVLAP’s growth, with the latest capital contribution of PEN 8.5 million taking place in 2019.
The stable outlooks reflect the company’s growth prospects, supported by the willingness of its shareholders to continue to support the company’s commercial and financial development with capital contributions. In July 2019, Germany-based Landsberg Investment S.L, owned by the DEG-Deutsche Investitions-Und Entwicklungsgessellschaft Mbh and Colombia-Based Altra Investments II GP, Inc. acquired 38% of AVLA S.A. — AVLAP’s ultimate parent — providing additional capital to support the growth of the company and to improve processes and governance.
Positive rating actions could take place if the company continues to develop its business in a profitable and planned fashion, while further strengthening its capital base and maintaining adequate underwriting. Negative rating actions could take place if the company fails to achieve its growth objectives profitably while at the same time negatively affecting its risk-adjusted capitalization. Additionally, if there are important capital outflows to its holding company that weaken AVLAP’s risk-adjusted capitalization, the ratings could be downgraded.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, 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 Universal BCAR (Version May 23, 2019)
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- Rating Surety Companies (Version Oct. 13, 2017)
- Rating New Company Formations (Version Oct. 13, 2017)
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: Dec. 5, 2018.
- Date Range of Financial Data Used: Dec. 31, 2014-Nov. 30, 2019.
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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