AM Best Revises Outlooks to Stable for Cooperativa de Seguros de Vida de Puerto Rico

AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of C (Weak) and the Long-Term Issuer Credit Rating of “ccc” (Weak) of Cooperativa de Seguros de Vida de Puerto Rico (COSVI) (San Juan, Puerto Rico).

The Credit Ratings (ratings) reflect COSVI’s balance sheet strength, which AM Best assesses as very weak, as well as its adequate operating performance, limited business profile and weak enterprise risk management (ERM).

COSVI’s absolute level of capital continued to increase as of year-end 2022 by $2.1 million or 9.5% as compared with the prior year, as a result of an operating income of $4 million. There was a material decline in 2020 due to a decrease in the discount rate used to determine the unfunded pension obligations in the defined benefit pension plan. As a result, the company’s risk-adjusted capital in 2022, as measured by Best’s Capital Adequacy Ratio (BCAR), improved but continues to be assessed at very weak. A capital management plan, approved in 2021 by COSVI’s board of directors, outlining actions for increasing risk-adjusted capital has been somewhat effective in 2022, with absolute capital increasing slightly. These actions include a 2023 capital-raise campaign directed at COSVI's shareholders. The outlooks have been revised to stable from negative, with AM Best acknowledging that COSVI’s continued efforts to improve capitalization and overall risk management processes, alleviate immediate pressure impacting risk-adjusted capitalization given the history of one-off events.

Unadjusted financial leverage remains just within AM Best’s tolerances, and quality of capital remains neutral to COSVI’s ratings. AM Best notes that COSVI will need to demonstrate continued execution of its capital management plan and support by the shareholders before any potential movement in the balance sheet strength assessment. COSVI also is continuing to work with a third party to strengthen the company’s overarching ERM framework and capabilities. AM Best will continue to monitor progress closely on all initiatives presented.

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.

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