AM Best Withdraws Credit Ratings of AVLA Seguros, S.A. de C.V.

AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of B+ (Good), the Long-Term Issuer Credit Rating of “bbb-” (Good) and the Mexico National Scale Rating (NSR) of “aa-.MX” (Superior) of AVLA Seguros, S.A. de C.V. (AVLA) (Mexico). Concurrently, AM Best has withdrawn these Credit Ratings (ratings) as the company has requested to no longer participate in AM Best’s interactive rating process.

This final rating update was completed after the company requested to no longer participate in the rating process.

The ratings reflect AVLA’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

AVLA is owned by AVLA Bermuda Holding Corp Ltd. (AVLA Bermuda), a financial holding company engaged in insurance operations in Chile, Peru and Brazil. As of December 2023, AVLA Bermuda had equity of USD 93.9 million and generated premiums of USD 129 million. AVLA is considered a new company formation as it began operations in October 2021 under a license of “Seguros de Crédito y Caución” (Credit and Surety), and can issue three types of coverages: credit, surety and bonding. The company will target those segments in which the group has regional expertise in surety and credit insurance. Nevertheless, AVLA’s business profile is considered limited, given the high degree of competition in the segment and the notable differences in market dynamics compared with the other regions where the group operates.

AVLA’S balance sheet strength is assessed at the strong level. The company has deployed its capital cautiously during the first year of operation; however, growth in 2023 has placed pressure on company’s Best’s Capital Adequacy Ratio (BCAR), which could further affect its balance sheet strength assessment, if not supported by capital growth.

The company’s operating performance is considered neutral and in line with its position as a recently formed company. AVLA has met its goals during its initial years and targets underwriting experience that aligns with market performance. AVLA’s ERM assessment is considered appropriate for the company’s risk appetite and strongly supported by the holding company’s back office.

The negative outlooks reflect AM Best’s concerns on risk-adjusted capitalization if the company continues to grow without any further capital contributions. Nevertheless, the group has demonstrated a policy to deploy capital to support the growth of its operations in the regions it participates.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all 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. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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. For more information, visit www.ambest.com.

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