Best’s News & Research Service - April 12, 2023 12:56 PM (EDT)
AM Best Affirms Credit Ratings of AVLA Seguros de Crédito y Garantía S.A.
- April 12, 2023 12:56 PM (EDT)
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+” (Good) of AVLA Seguros de Crédito y Garantía S.A. (AVLA) (Chile). The outlook of these Credit Ratings (ratings) is stable.
These ratings reflect AVLA’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
AVLA began operations in Chile in 2013 as AVALCHILE, before changing its name to AVLA in 2016. The company is majority owned by Inversiones AVLA Seguros S.A., which holds a 90.27% stake, with the remaining 9.73% held by the group’s ultimate parent, AVLA S.A. AVLA specializes in financial guarantees, credit insurance and surety; it ranks first in Chile in surety and financial guarantees and third in credit insurance, based on market share.
AM Best considers AVLA’s business profile to be neutral. The company has been able to successfully redefine its risk appetite through adverse market conditions and has reacted promptly to take advantage of the economic rebound during 2021 and 2022. In AM Best’s view, management’s capabilities remain key to adjusting its product offering amid the evolving market conditions.
AM Best views the company’s operating performance as adequate; results as of December 2022 are characterized by a recovery in underwriting quality with premiums and revenues growing. The economic growth prospects are favorable for the underlying industries in which AVLA operates, creating the potential for growth. For 2023, AM Best will continue to monitor AVLA’s results and underwriting quality as Chile’s economy recovers.
AVLA’s balance sheet strength assessment is strong given its solid capital base for the risks it undertakes, as reflected in its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). However, financial leverage at its holding company level limits AM Best’s view of the company’s balance sheet strength to the strong level, given the parent’s reliance on the company in terms of revenue and profits. This strong balance sheet strength assessment level also recognizes the willingness and proven history of capital contributions made by its shareholders to support AVLA’s growth, with the latest one taking place in 2021, which was equivalent to approximately one third of its reported equity at year-end 2020.
Negative rating actions could take place if AVLA’s market environment limits its operating performance or creates significant volatility in its underwriting metrics, especially if it affects the company’s capital position through continued negative bottom line results.
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:
- Understanding Global BCAR (Version June 30, 2022)
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- Rating Surety Companies (Version April 7, 2021)
- Scoring and Assessing Innovation (Feb. 27, 2023)
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: March 10, 2022.
- Date Range of Financial Data Used: Dec. 31, 2016 - Dec. 31, 2022
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.
AM Best does not validate or certify the information provided by the client in order to issue a credit rating.
While the information obtained from the material source(s) is believed to be reliable, its accuracy is not guaranteed. AM Best does not audit the company’s financial records or statements, or otherwise independently verify the accuracy and reliability of the information; therefore, AM Best cannot attest as to the accuracy of the information provided.
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AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.