OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of C+ (Marginal) and the Long-Term Issuer Credit Rating of “b-” of Cooperativa de Seguros de Vida de Puerto Rico (COSVI) (San Juan, Puerto Rico).
The revised outlooks reflect stability in COSVI’s risk-adjusted capital scores, largely driven by the aggregate excess of loss reinsurance agreement established in 2015, which transferred the risks of its annuity block and a significant portion of its Puerto Rico bond portfolio.
The rating affirmations reflect COSVI’s counter-party risk exposure with an unrated reinsurer. A.M. Best is concerned that COSVI might have to undo the reinsurance transaction if adverse developments occur. Additionally, spread compression has intensified as a result of the strategic investment changes implemented, which has unfavorably impacted operating results. The company is also challenged by the business operating environment in Puerto Rico.
Partially offsetting factors include COSVI’s efforts in executing a number of risk-mitigating and capital-improvement strategies, including the improvement in the credit quality of the bond portfolio that was not part of the risk transfer executed through the reinsurance agreement. Subsequently, changes to the company’s business mix have triggered a recalibration of the appropriate level of reserves and is supported by high policyholder retention rates.
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