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A.M. Best Removes From Under Review With Negative Implications and Downgrades Credit Ratings of Cooperativa de Seguros de Vida de Puerto Rico

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A.M. Best has removed from under review with negative implication
and downgraded the Financial Strength Rating to C (Weak) from C+
(Marginal) and the Long-Term Issuer Credit Rating (Long-Term ICR) to
"ccc+" from "b-" of Cooperativa de Seguros de Vida de Puerto Rico
(COSVI) (San Juan, Puerto Rico). The outlook assigned to the FSR is
stable, and the outlook assigned to the Long-Term ICR is negative.

The ratings reflect COSVI's balance sheet strength, which A.M. Best
categorizes as very weak, as well as its adequate operating performance,
limited business profile and weak enterprise risk management.

The negative outlook assigned to the Long-Term ICR reflects A.M. Best's
concerns that COSVI's risk-adjusted capitalization could further weaken
or operating performance could deteriorate.

The balance sheet strength assessment is derived from COSVI's
risk-adjusted capitalization, as measured by Best's Capital Adequacy
Ratio, which also is assessed at very weak. Puerto Rico experienced two
devastating hurricanes in the fourth quarter of 2017, which compromised
insurance operations on the island. COSVI, along with other Puerto Rico
insurance companies, were permitted to delay the filing of its 2017
statutory financial statements until June 2018. However, COSVI required
more time to complete its filing.

Furthermore, COSVI at year-end 2017 would have been required to have an
additional $34 million of capital, based upon annual cash-flow testing
and the depressed value of Puerto Rico bonds, which posted historic low
prices after the 2017 hurricanes. In absence of a capital contribution,
an additional reserve should have been booked at that time for the
required $34 million. As of June 2018, the bonds had recovered a large
part of their losses. COSVI also realized a portion of this recovery by
selling $51 million of its Puerto Rico bond holdings. The recovery in
the market value of the bonds, and the subsequent sale of a portion of
the holdings, meant that the cash-flow shortfall that occurred at
year-end 2017 no longer existed. COSVI has submitted a request to the
Office of the Commissioner of Insurance of Puerto Rico to allow the
company to recognize the increase in the value of the Puerto Rico bonds
for cash-flow testing. The request was approved.

A.M. Best believes that although COSVI has stabilized its balance sheet,
the company remains exposed to substantial investment risks. Business
development in 2018 remains stagnant due to the prolonged economic
depression in Puerto Rico over the last 12 years and the company's
limited access to external sources of capital. However, business renewal
persistency has been more than adequate, and investment income has
provided a sufficient hedge against underwriting fluctuations, even
though the company's business mix, whose expenses are mostly
front-loaded, have resulted in unfavorable underwriting performance.
Owing to the company's operating structure and its connection to
cooperatives and credit unions, the company's operations are well-suited
for stable development.

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
Recent
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Understanding
Best's Credit Ratings
. For information on the proper media
use of Best's Credit Ratings and A.M. Best press releases, please view
Guide
for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating
Action Press Releases
.

A.M. Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit
www.ambest.com
for more information
.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

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