A.M. Best Affirms Credit Ratings of Ocaso, S.A. Seguros y Reaseguros

LONDON–(BUSINESS WIRE)–A.M. Best has affirmed the Financial Strength Rating of A
(Excellent) and the Long-Term Issuer Credit Rating of “a+” of Ocaso,
S.A. Seguros y Reaseguros
(Ocaso) (Spain). The outlook of these
Credit Ratings (ratings) is stable.

The ratings reflect Ocaso’s excellent risk-adjusted capitalisation,
solid operating performance, and strong business profile. Offsetting
rating factors include the company’s almost exclusive focus on its
domestic market and the impact that the strengthening of legacy funeral
expense insurance (“decesos”) reserves has on its performance.

Ocaso’s balance sheet strength remains at an excellent level. Capital
and surplus increased at an annual compound rate of 6.1% between 2011
and 2016, supported by strong internal capital generation, reaching EUR
971.8 million at year-end 2016. The company’s risk-adjusted
capitalisation is further supported by a modest level of gross premium

Operating earnings have remained solid over the past five years, and the
company has produced combined ratios consistently below 90%. However,
Ocaso’s non-life results have been impacted negatively over recent years
by increases in reserves for legacy “decesos” books, following
regulatory requirements introduced in the Spanish market in 2015. A.M.
Best considers that the regulatory reserving schedule for “decesos”
policies underwritten before 1999 will continue to have a negative
effect on the company’s technical profits in the medium term. Despite
the company’s life technical profitability continuing to be impacted
negatively by the low interest rate environment, Ocaso reported a life
technical result of EUR 1.4 million in 2016. A.M. Best expects the
company’s profitability to benefit prospectively from the actions taken
to increase the volume of unit-linked business.

Ocaso maintains a well-established competitive position in Spain,
benefiting from a strong franchise and a broad distribution network.
Moreover, Ocaso has a strong competitive standing in the “decesos”
market, with a very stable customer base. Although A.M. Best considers
the high concentration in Spain to be a potential source of earnings
volatility, with approximately 97% of underwriting revenue sourced from
the domestic market in 2016, Ocaso has demonstrated its ability to
produce resilient results, even during periods of recession.

This press release relates to Credit Ratings that have been published
on A.M. 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 A.M. Best’s
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Best’s Credit Ratings
. For information on the proper media
use of Best’s Credit Ratings and A.M. Best press releases, please view
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A.M. Best
Jessica Botelho, CA
Financial Analyst

20 7626 6264

Le Cam, CFA, FRM
Director, Analytics
+44 20 7397 0268

Manager, Public Relations
+1 908 439 2200, ext. 5159

Director, Public Relations
+1 908 439 2200, ext. 5644