Best’s News & Research Service - August 04, 2022 12:53 PM (EDT)
AM Best Affirms Credit Ratings of La Colonial, S.A. – Compañía de Seguros
- August 04, 2022 12:53 PM (EDT)
Mexico City //BestWire// - AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) 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 La Colonial’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The rating affirmations reflect La Colonial’s risk-adjusted capitalization being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), mainly as a result of positive bottom-line results, as well as the acknowledgement of the underwriting team’s skills amid potential challenges from harsher competition. Partially offsetting these positive rating factors is the competitive market environment in the Dominican Republic, exacerbated by the slowdown in global economic activity from the COVID-19 pandemic.
La Colonial is the fifth-largest insurance company in the Dominican Republic, with an 8.9% market share as of December 2021. The company has maintained its leading position in the Dominican Republic despite changing market dynamics, which includes the continuous inflow of new health insurance premiums to the system from new participants. La Colonial operates as a multiline insurer, with 81% of its portfolio directed to property/casualty lines, based on gross written premium, with life/health insurance comprising 19%.
In 2021, the company reported a non-life combined ratio of 99.9%, mainly driven by a higher loss ratio, despite expense efficiencies achieved in previous periods. The benefits paid to the net premium written ratio for its life business also increased. For 2021 and onward, operating efficiencies might be harder to sustain; however, AM Best considers La Colonial’s management team to be well-prepared to maintain solid profitability and growth to support its operation.
La Colonial’s risk-adjusted capitalization remains at the strongest level, as measured by BCAR, supported adequately by a comprehensive reinsurance program that mitigates the potential impact from regional natural disasters on the company’s results. These characteristics are reflected in its solvency and capitalization metrics and its excellent market position. Going forward, AM Best expects the company to continue performing with premium sufficiency, driven by lower technical costs in the medium term.
Positive rating actions are not expected in the medium term. Factors that might lead to negative rating actions include erosion of La Colonial’s capital base, either as a result of negative operating performance or changes in the macroeconomic environment that adversely impact the operations of the company. Additionally, any major changes in La Colonial’s capital base, including significant dividends or capital outflows, that diminish AM Best’s view of the company’s balance sheet strength could result in negative rating actions.
The methodology used in determining these ratings is Best’s Credit Rating Methodology (Version Nov. 13, 2020), which provides a comprehensive explanation of AM 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 Global BCAR (Version June 30, 2022)
- Catastrophe Analysis in A.M. Best Ratings (Version Oct. 13, 2017)
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- Scoring and Assessing Innovation (Version March 5, 2020)
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 Guide to Best’s Credit Ratings.
- Previous Rating Date: July 9, 2021
- Date Range of Financial Data Used: Dec. 31, 2017-Dec. 31, 2021
This press release relates to rating(s) that have been published on AM 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 AM Best’s Recent Rating Activity web page.
AM Best does not validate or certify the information provided by the client in order to issue a credit rating.
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AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.