Best’s News & Research Service - July 13, 2007 03:05 PM (EDT)
A.M. Best Downgrades and Assigns Ratings to Colonial Life Insurance Company (Trinidad) Limited
OLDWICK, N.J. //BestWire// - A.M. Best Co. has downgraded the financial strength rating (FSR) to B++ (Good) from A- (Excellent) and assigned an issuer credit rating (ICR) of “bbb+” to Colonial Life Insurance Company (Trinidad) Limited (CLICO [TRINIDAD] LTD). The outlook for the FSR is stable, and the outlook assigned to the ICR is stable. CLICO is an insurance member company of CL Financial Limited (CLF), a diversified holding company based in Trinidad and Tobago.
The ratings of CLICO (TRINIDAD) LTD. reflect A.M. Best’s concern over its significant exposure to and high concentration in investments with affiliated companies and intercompany transactions. Although volatile, CLICO (TRINIDAD) LTD has benefited from a good appreciation on these affiliated assets, relative to what is available on the Trinidad & Tobago Stock Exchange. In an environment like Trinidad & Tobago, there are limited profitable investment opportunities comparable to CLICO (TRINIDAD) LTD’s investments in affiliates. However, the level of investment in affiliates is well outside an international industry norm. A.M. Best notes that while the valuation of the affiliated investments reported on its annual statement was approved by a reputable and globally recognized independent party, some of these affiliated investments are not quoted on any stock exchange. A.M. Best also notes the unavailability of CLF’s audited 2006 financial statements at the time of the rating review. As a result, A.M. Best was unable to evaluate the impact of the 2006 consolidated financial results of CLF on CLICO (TRINIDAD) LTD. A.M. Best also notes the higher debt liabilities as a result of collateralized borrowings, which are collateralized by affiliated assets, but this does not significantly impact the company’s equity-to-debt ratios.
A.M. Best continues to recognize CLICO (TRINIDAD) LTD’s ownership by CLF and its status as the flagship insurance company of the CLF group. Other positive rating factors include CLICO (TRINIDAD) LTD’s dominant market share and strong brand name recognition in the group and individual pensions businesses in Trinidad and Tobago; its niche focus on mutual funds and investment management businesses; significant growth in its asset base and stockholders’ equity and increased investment returns—primarily as a result of its significant investment in affiliated investments; increased revenues in its core lines of business; and focus on improved management techniques.
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