A.M. Best Affirms Ratings of La Colonial, S.A. Compañía de Seguros

MEXICO CITY--(BUSINESS WIRE)-- A.M. Best has affirmed the financial strength rating (FSR) of B++ (Good) and the issuer credit rating (ICR) of “bbb+” of La Colonial, S.A. Compañía de Seguros (La Colonial) (Santo Domingo, Dominican Republic). The outlook for both ratings is stable.

The ratings reflect La Colonial’s good capitalization and clear management directives, its excellent market position and strong reinsurance program. Partially offsetting these positive rating factors are the company’s still high operational expenses and its impact on technical results, which generates dependence on investment income.

The company has shown good underwriting capabilities historically while participating in a highly competitive market, and has been able to mitigate the potential impact of natural disasters in the region through the use of a strong reinsurance program. These characteristics are well reflected in its solvency and capitalization metrics and its excellent market position.

For 2014, La Colonial has been able to reduce its operational cost structure, which was highly impacted during the past years due to personnel layoffs and the related compensation charges. The company is moving toward a profitability driven business and restructuring its premium portfolio by cleansing bad risks and focusing on improving its operational efficiency, which explains its marginal growth during the year. Underwriting quality improved in 2014 from the previous year as the loss ratio diminished to 67.2% (2013: 71.5%) due to better risk selection and improved practices, particularly in its motor business.

A key aspect of La Colonial’s operation is the performance and dependence on investment income, which has compensated for its negative technical results in past years. A.M. Best believes that as the company continues to improve its operating efficiency and is able to produce better quality underwriting, this dependence on investment income should diminish. However, this is an important factor limiting the ratings, despite the strong yield on La Colonial’s investment portfolio.

A positive rating action could result if operational costs keep diminishing at a stable rate while the company produces positive technical results and maintains its capital position. Factors that might lead to negative rating actions include protracted adverse underwriting and overall performance and/or a significant deterioration in its risk-adjusted capitalization.

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:

• Catastrophe Analysis in A.M. Best Ratings
• Evaluating Country Risk
• Risk Management and the Rating Process for Insurance Companies
• Understanding Universal BCAR

Click here for a general description of the policies and procedures used to determine credit ratings. Also in accordance with Mexican regulations, the following is a link to required disclosures – A.M. Best America Latina Supplementary Disclosure.

• Previous Rating Date: Mar. 14, 2014
• Date of Financial Data Used: Dec. 31, 2014

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 visit A.M. Best’s Ratings & Criteria Center.

A.M. Best’s credit ratings are independent and objective opinions, not statements of fact. A.M. Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. A.M. Best’s credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions. View our entire notice for complete details.

A.M. Best receives compensation for interactive rating services provided to organizations that it rates. A.M. Best may also receive compensation from rated entities for non-rating related services or products offered by A.M. Best. A.M. Best does not offer consulting or advisory services. For more information regarding A.M. Best’s rating process, including handling of confidential (non-public) information, independence, and avoidance of conflicts of interest, please read the A.M. Best Code of Conduct.

A.M. Best - Europe Rating Services Limited (AMBERS), a subsidiary of A.M. Best Company, is an External Credit Assessment Institutions (ECAI) in the European Union (EU). Therefore, credit ratings issued by AMBERS may be used for regulatory purposes in the EU as per Directive 2006/48/EC.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Elí Sánchez, +(52) 55-1102-2720, ext. 108
Financial Analyst
[email protected]
or
Alfonso Novelo, +(52) 55-1102-2720, ext. 107
Director, Analytics
[email protected]
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
[email protected]
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best Company, Inc.

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