By NEIL HARTNELL
Tribune Business Editor
The Bahamas’ largest life and health insurer yesterday received a boost from the industry’s top rating agency, which upgraded the company’s outlook to ‘stable’ from ‘negative’.
A.M. Best also affirmed Colina Insurance’s financial strength rating of ‘A-’ (Excellent) and issuer credit rating of ‘a-’, while also holding the latter for its parent, BISX-listed Colina Holdings (Bahamas), at ‘bbb-’.
The ratings agency upgraded Colina’s outlook on the grounds it had returned to “a normalised earnings profile with the expectation of more consistent operating results moving forward”.
It shrugged off concerns about Colina Insurance’s heavy concentration in, and exposure to, real estate investments and the level of delinquency in its mortgage portfolio - sectors being heavily impacted by the continued weak economic environment.
“The rating affirmations for Colina reflect its leading position in the life/health market in the Bahamas, its adequate risk-adjusted capitalisation, stabilised operating results and conservative reserving practices,” A. M. Best said.
“Nevertheless, A.M. Best remains concerned with the risks associated with Colina’s high concentration in real estate investments relative to the total equity of the company and the continued delinquencies in its mortgage loan portfolio, which are attributable to the continued weakness in the Bahamian economy.
“While the company’s earnings performance has improved, a prolonged deterioration in the local economic environment can create a negative effect on its core life/health insurance lines. In addition, while profitable, certain business lines have continued to report volatile results.”
In response, Colina said it had enjoyed a 6.9 per cent growth in its total equity base, and an increase in total net income of $6.7 million to $12.3 million, for the year ended December 31, 2012.
And, by end-June 2013, the company had increased total assets by $7.6 million, and produced a further $1.7 million increase in total equity net of dividends to shareholders.
A. M. Best added that Colina was “well-positioned at the current rating level. “
“Downward rating actions could result if a material deterioration were to occur in Colina’s operating results, worsening delinquency rates within the mortgage portfolio were recorded and/or a deterioration in the Bahamian economic environment,” it warned.
Emanuel Alexiou, Colina’s executive vice-chairman, said: “We are pleased that A.M. Best has once again recognised Colina’s strong operating performance and affirmed our A- (Excellent) financial strength rating.
“We also believe the upgraded ‘stable’ outlook reflects A.M. Best’s acknowledgement of our continued progress despite our challenging economic environment, and we are encouraged to maintain this momentum for all of our stakeholders.”