OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has downgraded the financial strength rating to C++ (Marginal) from B- (Fair) and issuer credit rating to “b” from “bb-” of Cooperativa de Seguros de Vida de Puerto Rico (COSVI) (San Juan, PR). Both ratings have been placed under review with negative implications.
The rating downgrades reflect the drop in COSVI’s surplus reported through year-end 2011. COSVI recorded an operating loss due to a reduction in its third party administrative fees and weak results for its interest sensitive products as well as investment-related losses. Capital also was negatively impacted by the need for additional real estate-related valuation reserves and the correction of an error. Thus, A.M. Best believes there is uncertainty surrounding COSVI’s ability to generate consistent and sustainable positive earnings from its core lines of business.
Partially offsetting these negative rating factors are the improvement in the quality of COSVI’s statutory capital and surplus with the conversion of most of the remaining surplus notes into common stock capital; its well-established presence in the cooperative and life insurance marketplace in Puerto Rico; diversified product offerings; and continuing business and cost-restructuring initiatives to improve its marketing platform. In addition, the ratings acknowledge COSVI members’ commitment to support the entity’s financial flexibility.
The under review with negative implications status reflects A.M. Best’s concerns with COSVI’s ability to stabilize its risk-adjusted capitalization in the near term. During the under review period, A.M. Best will evaluate the effective execution of existing plans to mitigate these losses as well as for improving its capital position.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. 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.
Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.