MEXICO CITY--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” of La Colonial, S.A. Compañía de Seguros (La Colonial) (Santo Domingo, Dominican Republic). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect the good execution of its strategy, consistently with improvements in La Colonial’s underwriting and expense management, and robust risk-adjusted capitalization supported by a strong reinsurance program. Partially offsetting these positive rating factors are the company’s high operational expenses and its dependence on investment income.
La Colonial is the fourth largest insurance company in the Dominican Republic with a 2016 market share of 9.2%. Historically, the company has been able to post adequate profitability and maintain a leading position in the Dominican Republic despite changing market dynamics, the entrance of global players and a highly competitive environment. The company operates as a multiline insurer and its portfolio is composed of fire (36%), auto (30%), accident and health (15%), miscellaneous (7%), group life (5%), cargo (3%), surety (2.0%), hull (1.0%) and less than 1% for individual life and health, based on gross written premium.
During 2016, the company increased its retention and strengthened its underwriting strategy, resulting in an improved loss ratio and better efficiency. However, its combined ratio, while improved, has not yet reached premium sufficiency and overall net results are still dependent of investment income.
La Colonial’s risk-adjusted capitalization remains strong and is adequately supported by a comprehensive reinsurance program that mitigates the potential impact from regional natural disasters on the company’s results. These characteristics are well reflected in its solvency and capitalization metrics and its excellent market position. La Colonial’s dependence on investment income has diminished in the past few years, but remains a key factor for achieving positive bottom line results.
Positive rating actions could occur if the company continues to improve its underwriting performance, by achieving greater efficiency and reducing its dependency on investment income, while at the same time strengthening its capital base through increased profitability. Factors that might lead to negative rating actions include deterioration of its technical income, either by higher operational costs or a decline in the underwriting quality that places more emphasis on financial income to sustain profitability. Any major changes in La Colonial’s capital base, including significant dividends or capital outflows, that diminish A.M. Best’s view of the company’s risk-adjusted capitalization also could result in negative rating actions.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Catastrophe Analysis in A.M. Best Ratings (Nov. 3, 2011)
- Evaluating Country Risk (May 2, 2012)
- Risk Management and the Rating Process for Insurance Companies (April 2, 2013)
- Understanding Universal BCAR (May 1, 2017)
View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, please refer to Understanding Best’s Credit Ratings.
- Previous Rating Date: April 26, 2016
- Date of Financial Data Used: Dec. 31, 2016
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