The ratings reflect Ocaso’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
Ocaso’s balance sheet strength assessment is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The balance sheet strength assessment benefits from low dependence on reinsurance, excellent liquidity and absence of financial leverage. A partially offsetting factor is the deficiency of the legacy pre-1999 “decesos” (i.e., funeral expense insurance) reserves, following regulatory changes that occurred in 2015. The reserves continue to be strengthened annually, and the deficiency will reduce incrementally until 2033. This is a year before the original regulatory reserving schedule of 2034, with the company benefitting from the recent change in the Spanish mortality tables, which has reduced the total reserve deficiency.
Ocaso has a track record of strong operating performance, supported by very stable and profitable underwriting performance, demonstrated by a five-year (2016-2020) weighted average combined ratio of 83.5%. Profitability of the life business continues to be affected adversely by reserve strengthening of the run-off book of business that contains policies with high guarantees. The COVID-19 pandemic has affected the technical performance of the decesos book modestly, given the associated increase in mortality rates. Despite this, the technical result has remained resilient and AM Best expects Ocaso’s operating performance to remain strong over the medium term.
Ocaso has a well-established competitive position in
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Source: AM Best