AM Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of bbb+ to AVLA Seguros de Crdito y Garanta S.A. (AVLA) (Chile). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect AVLAss 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 groups 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 Chiles market for credit insurance and financial guarantees. The companys recent creation and current development of its niche market still leaves room for implementation risk, which in AM Bests 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 Bests 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 AVLAs 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 companys 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 companys 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 Bests Credit Rating Methodology, which provides a comprehensive explanation of AM Bests rating process and contains the different rating criteria employed in the rating process. Bests 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 14, 2018)
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- Rating New Company Formations (Version Oct. 13, 2017)
- Rating Surety Companies (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 Understanding Bests Credit Ratings.
- Previous Rating Date: Not Rated.
- Date of Financial Data Used: September 30, 2018.
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 Bests Recent Rating Activity web page.
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