A.M. Best Affirms Ratings of Cooperativa de Seguros Multiples de Puerto Rico and Real Legacy Assurance Company, Inc.; Revises Outlook to Negative

OLDWICK, N.J., Oct 30, 2015 (BUSINESS WIRE) -- A.M. Best has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of A- (Excellent) and the issuer credit rating (ICR) of “a-” of Cooperativa de Seguros Multiples de Puerto Rico (CSM) (San Juan, PR). Concurrently, A.M. Best has revised the outlook to negative from stable and affirmed the FSR of A- (Excellent) and the ICR of “a-” of CSM ‘s separately rated subsidiary, Real Legacy Assurance Company, Inc. (Real Legacy) (Guaynabo, PR).

The ratings reflect CSM's strong risk-adjusted capitalization, significance market presence within Puerto Rico and its improving, albeit slight, underwriting performance in recent years. The negative outlook is driven by a significant decline in CSM’s policyholder surplus over the past five years along with a weak underwriting performance primarily due to adverse loss reserve development (sinkhole losses in Florida and fidelity losses) and an elevated underwriting expense structure.

The ratings for Real Legacy reflect its strong risk-adjusted capitalization, profitable operating performance driven by solid investment income and somewhat variable underwriting performance.

Partially offsetting these positive rating factors is Real Legacy's geographic risk concentration as a property writer in Puerto Rico and the U.S. Virgin Islands (USVI), which exposes results to the potential for frequent and severe weather-related events, as well as economic, judicial and regulatory changes within its operating environment. Other offsetting factors include the impact of the competitive local marketplace in which the company operates, as well as the elevated underwriting expense ratio. Although the company derives benefits from its affiliation with CSM, one of the leading multi-line insurance providers in Puerto Rico, it also creates the potential for capital or operational pressures, hence the reason for the negative outlook.

Negative rating actions for CSM could result in the near term if operating performance continues to weaken due to deterioration in underwriting performance, a material increase in catastrophe losses beyond expectations that weakens overall capitalization or a continuation of the declining capital position evident over the past several years.

This press release relates to rating(s) 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 visit A.M. Best’s Ratings& Criteria Center .

A.M. Best Affirms Ratings of Cooperativa de Seguros Multiples de Puerto Rico and Real Legacy Assurance Company, Inc.; Revises Outlook to Negative