Best Affirms Ocaso ‘A+’ Rating

June 28, 2005

A.M. Best Co. announced that it has affirmed the financial strength rating of “A+” (Superior) of Spain’s Ocaso, S.A. Seguros y Reaseguros, with a stable outlook.

“The rating reflects the company’s superior risk-based capitalisation, excellent and stable operating performance and excellent business profile,” said Best. However, the rating agency also noted that “these factors are offset by Ocaso’s limited international presence.”

Best explained that Ocaso is one of the leading providers of funeral expenses in Spain “with an expanding household, corporate multi-risks and UK household insurance book. The company has a strong brand and an extensive distribution network.” Best indicated that it believes the company’s “gradual diversification into non-life risks is positive given the limited prospects for growth in the traditional funeral expenses insurance industry. Despite Ocaso having built up a material life portfolio, growth is being somewhat offset by a low interest rate environment in a market strongly dominated by bancassurance agreements.”

Best also said it “expects the strong earnings retention to continue, benefiting from stable investment markets, a persistently low combined ratio and a gradually maturing life book. Ocaso’s cautious underwriting philosophy and expense control has consistently led to positive non-life technical results with a combined ratio remaining stable below 90 percent. Total net profits for 2004 increased for the second consecutive year, reaching 35.6 million euros ($48.6 million), an increase of more than 12 percent compared to the previous year driven mainly by the lower combined ratio and the expanding insurance portfolio.”

In conclusion Best stressed that “Ocaso’s risk-based capitalisation remains superior, having benefited from significant profit retention in recent years. Ocaso retains a strong ability to cover the stringent cumulative reserving requirements imposed by the local regulator in respect of old funeral expense business.”

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