AM Best Assigns Credit Ratings to AVLA Seguros de Crédito y Garantía S.A.
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AM Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb+” to AVLA Seguros de Crédito y Garantía S.A. (AVLA) (Chile). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect AVLAs’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 (ERM).
AVLA is a Chilean insurer; originally constituted in 2013 as AVALCHILE. In 2016, the company changed its name to AVLA. The company is majority-owned by Inversiones AVLA Seguros S.A. (90.27%) and with the remaining 9.73% held by the group’s ultimate parent, AVLA S.A. The company specializes in financial guarantees, credit insurance and surety, ranking first in surety and financial guarantees and third in credit insurance in Chile.
Business profile is considered neutral to the rating; since its creation in 2013, AVLA has successfully become one of the main participants in Chile’s market for credit insurance and financial guarantees. The company’s recent creation and current development of its niche market still leaves room for implementation risk, which in AM Best’s view, is mitigated partially by the so far successful implementation of its business plan.
The operating performance of the company is considered adequate despite its recent creation. AVLA has been able to promote its products in a profitable manner and maintain adequate underwriting metrics; however, the operation remains small and needs to convert to an adequate and less volatile cost structure. Claim experience has been good, with strong support from a reinsurer panel with excellent security.
AVLA Seguros’ balance sheet assessment is strong given its solid capital base for the risks it undertakes, as reflected in its very strong risk-adjusted capitalization. However, financial leverage at its holding company level limits AM Best’s view of balance sheet strength to strong, given the relevance of the company to its parent in terms of revenues and profits. The strong assessment also recognizes the willingness and proven history of capital contributions made by its shareholders to support AVLA’s growth.
The stable outlooks on the ratings are based on the prospect of the company continuing to develop its niche market in a profitable manner. Consequently, the outlooks also recognize the willingness of its shareholders to continue to support the company’s growth with capital contributions.
Positive rating actions could take place if the company continues to evolve its niche market in a profitable manner that allows its capital base to grow. Negative rating actions could take place if the company’s risk adjusted capitalization falls below levels that support the current ratings, either by excessive growth without further capital contributions or by significant losses that affect the capital position of the company.
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:
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 Understanding Best’s Credit Ratings.
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