Best’s News & Research Service - July 09, 2021 12:51 PM (EDT)
AM Best Affirms Credit Ratings of La Colonial, S.A. - Compañía de Seguros
- July 09, 2021 12:51 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, and also acknowledge the skills of the underwriting team 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 fourth-largest insurance company in the Dominican Republic, with a 9.2% market share as of September 2020. 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 80% of its portfolio directed to property/casualty lines, based on gross written premiums, with accidents and health and life insurance comprising 17% and 3%, respectively.
In 2020, the company reported a non-life combined ratio of below 100%, as a result of an improved loss ratio, and a continued expense efficiencies. The benefits paid to net premium written ratio for its life business also decreased. 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 Best’s Capital Adequacy Ratio (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 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. Factors that could lead to negative rating actions include erosion of the company’s capital base, either as a result of negative operating performance or changes in the macroeconomic environment that adversely impact the company’s operations. Additionally, any major changes in La Colonial’s capital base, including significant dividends or capital outflows, which diminish AM 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 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 Universal BCAR (Version March 11, 2021)
- Catastrophe Analysis in A.M. Best Ratings (Version Oct. 13, 2017)
- Available Capital & Holding Company Analysis (Version Oct. 13, 2017)
- Rating Surety Companies (Version April 7, 2021)
- 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 1, 2020
- Date Range of Financial Data Used: Dec. 31, 2016-Dec. 31, 2020
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.
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