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.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all 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. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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. For more information, visit www.ambest.com.
Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
Olga Rubo, FRM
+52 55 1102 2720, ext. 134
Associate Director, Analytics
+52 55 1102 2720, ext. 122
Manager, Public Relations
+1 908 439 2200, ext. 5159
Director, Public Relations
+1 908 439 2200, ext. 5644