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FOR IMMEDIATE RELEASE
MEXICO CITY - JUNE 14, 2024 03:25 PM (EDT)
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. (AVLA) (Lima, Peru). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect AVLA’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.
The stable outlooks reflect AM Best’s expectation that the company will continue to adjust to the market conditions profitably while maintaining sound capitalization.
AVLA is a Peru-based property/casualty insurer that began operations in 2015. The company specializes in surety, and complimentary lines of credit insurance and engineering, with the recent addition of a property line, in September 2023; AVLA remains in the top 10 among non-life carriers in Peru and top three in the country’s surety segment, based on market share.
AM Best views AVLA’s business profile as neutral. Since its creation in 2015, AVLA 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. AM Best’s neutral assessment of the company’s business profile reflects the 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. AVLA has been able to promote its products in a profitable manner and maintain adequate underwriting performance since 2017, taking proactive steps to manage claims due to market events and developing alternatives for revenue. AVLA’s technical results has been complemented by an active investment strategy that generated good investment results in 2023.
AVLA’s balance sheet strength assessment is very 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). The very strong balance sheet strength assessment also recognizes the company’s capital management capabilities and shareholders’ willingness and proven history of making capital contributions to support AVLA’s growth. A panel of reinsurers supports AVLA’s balance sheet strength level with excellent security. Limiting AVLA’s ratings is the potential pressure of the high financial leverage present in its ultimate parent company, AVLA Bermuda Holding Corp Ltd.
Negative rating actions could take place if the financial leverage at the holding company deteriorates or if there are capital outflows to AVLA’s holding company, AVLA Bermuda Corp Ltd., which weaken AVLA’s risk-adjusted capitalization to a level that no longer supports the current rating. Positive rating actions could take place if AVLA is able to maintain a stable upward trend in risk-adjusted capitalization, underpinned by positive bottom-line results. If the financial leverage at the holding company improves, it could potentially relieve the drag, prompting positive rating actions. Negative rating actions could occur if the perception of country risk by AM Best changes, negatively impacting the balance sheet strength of the company.
The methodology used in determining these ratings is Best’s Credit Rating Methodology (Version Jan. 18, 2024), 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 March 7, 2024)
· Available Capital and Insurance Holding Company Analysis (Version Jan. 18, 2024)
· Rating Surety Companies (Version April 25, 2024)
· Scoring and Assessing Innovation (Feb. 27, 2023)
· Evaluating Country Risk (June 6, 2024)
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, relevant sources of information and the frequency for updating ratings, please refer to Guide to Best’s Credit Ratings.
· Previous Rating Date: April 12, 2023
· Initial Rating Date: Dec. 5, 2018
· Date Range of Financial Data Used: Dec. 31, 2018-Dec. 31, 2023
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