MEXICO CITY--(BUSINESS WIRE)--A.M. Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating 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 Credit Ratings (ratings) reflect La Colonial’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The positive outlooks recognize the improvements made by La Colonial in terms of operating performance and acknowledge the good execution of its strategy. The ratings also reflect the company’s robust risk-adjusted capitalization supported by a strong reinsurance program. Partially offsetting these positive rating factors is the competitive environment in the Dominican Republic.
La Colonial is the fifth-largest insurance company in the Dominican Republic with a 2017 market share of 8.38%, displaced from fourth place as a result of an inflow of new health premiums to the system from new competitors. Historically, the company has been able to post adequate profitability and maintains 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 (34%), auto (31%), accident and health (16%), miscellaneous (8%), life (5%), cargo (3%), surety (2%) and hull (1.0%), based on gross written premium.
In 2017, the company improved its combined ratio to levels below 100% as a result of changes in reserves in the auto segment and a continuation of expense efficiency. 2018 could prove to be a year of increased competition in the Dominican market as lower reserve requirements could drive price competition in the auto segment. In this regard, A.M. Best considers La Colonial’s underwriting team to be well-prepared to manage such competition.
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 and remains a key factor for strengthening positive bottom line results. Looking forward, A.M. Best expects the company to continue performing with premium sufficiency driven by lower technical costs in the medium term, to achieve a higher rating.
Positive rating actions could occur if the company continues to improve its underwriting performance, by achieving greater efficiency and consolidating its positive trend in operating performance, 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:
- Evaluating Country Risk (Version Oct. 13, 2017)
- Understanding Universal BCAR (Version Oct. 13, 2017)
- Catastrophe Analysis in A.M. Best Ratings (Version Oct. 13, 2017)
- Available Capital & Holding Company Analysis (Version Oct. 13, 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: May 24, 2017
- Date of Financial Data Used: Dec. 31, 2017
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