Best Affirms Ocaso ‘A+’ Rating

June 25, 2004

A.M. Best Co. announced that it has affirmed the financial strength rating of “A+” (Superior) of Spanish funeral and household insurer Ocaso, S.A. Seguros y Reaseguros with a stable outlook.

“The rating reflects the company’s excellent business profile, excellent and stable operating performance and resilient risk-based capitalisation,” said Best. “The main offsetting factor is the company’s limited international presence.”

The company is a leader in the Spanish market and “benefits from its strong brand and strong distribution network,” said Best. “It is successfully managing increasing competition in these sectors, while gradually expanding into the domestic traditional life business and internationally into the U.K. household sector. To date, both lines of business have shown a high, but sustainable, growth rate.”

The rating agency also noted that “Ocaso’s cautious underwriting philosophy and expense control has consistently led to positive non-life technical results with a combined ratio remaining stable at just below 90 percent. Total net profits for 2003 increased significantly, reaching 31.7 million euros ($38.36 million),” compared to 9.9 million euros ($12 million) in 2002, mainly driven by recovering stock markets and mitigated by the new business strain of the life business.”

Best said it “expects this to be gradually reduced as the life business matures and releases the profits embedded into technical reserves. Prospectively, technical results from the non-life business are likely to offset any potential negative impact from life business growth and adverse movements in financial markets.”

It also noted that the company’s risk-based capitalization “remains superior, factoring a significant increase for life technical reserves in line with new business in 2003. Ocaso retains a strong ability to cover the stringent cumulative reserving requirements from the local regulator with regard to old funeral expense business. Moreover, its business strategy places strong emphasis on new non-capital intensive products, frequent re-pricing, low guarantees and the gradual transfer of old policies into new designs.”

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