AMSTERDAM–(BUSINESS WIRE)–AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Abarca – Companhia de Seguros S.A. (Abarca) (Portugal).

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

The revision of the outlooks to negative reflects pressure on the balance sheet strength assessment due to a decline in the company’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), following reserve strengthening in 2022 for a large claim first reported in 2020. This claim is reinsured with one counterparty and, due to its size, generates high capital requirements for counterparty credit and dispute risk in the BCAR. As a result, BCAR scores are expected to decline to the strong level at year-end 2022 from strongest at year-end 2021.

The balance sheet strength assessment of strong also reflects the company’s conservative and liquid investment portfolio. Offsetting factors include Abarca’s high dependence on reinsurance and uncertainty surrounding the sufficiency of loss reserves given a relatively short loss history. In addition, the company’s small capital base exacerbates the sensitivity of its solvency position to stressed scenarios and variations in future performance.

The adequate operating performance assessment is based on AM Best’s expectation of Abarca’s good prospective earnings generation. For 2022, Abarca reported preliminary a net loss after tax of EUR 871,000 reflecting an unusually high loss ratio and net investment losses. Abarca reported net profits (after tax) in 2019-2021. Since its inception in 2016, the company also has built up its equalisation reserves, for which AM Best gives credit as part of available capital.

Abarca’s limited business profile assessment reflects its position as a small monoline insurer, focusing entirely on surety insurance in Spain and Portugal. The company has a small albeit growing market profile in Spain, where it generates most of its revenue, and a leading position in the smaller Portuguese market. Abarca’s distribution channels are mainly direct and through brokers, with a small portion going through its bancassurance channel.

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.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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Contacts

Giannina Carbajal Ortiz
Financial Analyst
+31 30 308 5428
giannina.carbajal@ambest.com

Mathilde Jakobsen
Director, Analytics
+31 20 308 5427
mathilde.jakobsen@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Al Slavin
Senior Public Relations Specialist
+1 908 439 2200, ext. 5098
al.slavin@ambest.com