A.M. Best Revises Outlooks to Positive for La Colonial, S.A. Compañía de Seguros
May 16 2018 - 1:29PM
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
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
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version on businesswire.com: https://www.businesswire.com/news/home/20180516006199/en/
A.M. BestElí Sánchez, +52 55 1102 2720, ext.
108Senior Financial
Analysteli.sanchez@ambest.comorChristopher Sharkey, +1
908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorAlfonso Novelo, +52
55 1102 2720, ext. 107Senior Director,
Analyticsalfonso.novelo@ambest.comorJim Peavy, +1
908-439-2200, ext. 5644Director, Public
Relationsjames.peavy@ambest.com