Ratings Roundup: La Colonial, InterGlobal

A.M. Best Co. has affirmed the financial strength rating of ‘B++’ (Good) and issuer credit rating of “bbb+” of the Dominican Republic’s La Colonial, S.A. Compania de Seguros, both with stable outlooks. The ratings reflect La Colonial’s “profitable net results and more than adequate risk-based capitalization,” said Best. La Colonial’s “consistent levels of positive investment income have resulted in historically favorable earnings that have enabled the company to continue to increase its level of surplus. La Colonial’s financial strength is further enhanced by its comprehensive reinsurance program and strong liquidity and solvency metrics.” As partial offsetting factors Best cited La Colonial’s “limited financial flexibility, geographic concentration of its business exclusively in the Dominican Republic and losses stemming from its property/casualty book of business.” Best explained that La Colonial’s “business concentration makes it vulnerable to regulatory, economic and political influence and volatility. Moreover, La Colonial will remain challenged to increase its market share while generating consistent earnings in a very competitive and maturing market. Also, the frequency of catastrophic events in the Caribbean presents a substantial level of risk exposure to La Colonial as it formalizes its risk management program. Potential positive rating triggers would include sustained improvement in La Colonial’s underwriting results in conjunction with tangible improvements in the Dominican Republic regulatory environment and other country risk metrics. Possible negative rating triggers could include deterioration in the company’s underwriting results, and consequently, a decline in its risk-based capitalization.”

A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of ‘B++’ (Good) and issuer credit rating of “bbb+” of UK-based InterGlobal Insurance Company Limited, both with stable outlooks. The ratings reflect InterGlobal’s “improved and sustainable level of both risk-adjusted capitalization and financial flexibility through a capital injection from a strong insurance organization,” Best explained. As an offsetting factor Best noted the company’s “very poor underwriting performance in recent years. Challenging conditions during 2009 and 2010 within the international private medical insurance market together with a select number of poorly performing non-experience rated large accounts in InterGlobal’s portfolio are expected to lead to a peak underwriting loss of around $12 million in financial year 2011.” However, Best also pointed out that “management’s actions of pruning loss-making business, portfolio re-pricing and containing premiums expansion during underwriting year 2011 are expected to produce positive technical results in financial years 2012 and 2013. In 2011, a $15 million capital injection and a new whole account outward quota share reinsurance agreement served to mitigate the impact of the negative operating performance on risk-adjusted capitalization and boosted the latter to a solid level. Upward rating actions on InterGlobal are unlikely in the near future. Negative rating actions could occur if underwriting results remain negative in financial year 2012 and onwards.”