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
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
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
This press release relates to rating(s) that have been published on
A.M. Best's website. For additional 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.
A.M. Best does not validate or certify the information provided by
the client in order to issue a credit rating.
While the information obtained from the material source(s) is
believed to be reliable, its accuracy is not guaranteed. A.M. Best does
not audit the company’s financial records or statements, or otherwise
independently verify the accuracy and reliability of the information;
therefore, A.M. Best cannot attest as to the accuracy of the information
A.M. Best’s credit ratings are independent and objective opinions,
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