Best Affirms Colonial Group and Subs Ratings; Outlook Stable

September 28, 2012

A.M. Best Co. has affirmed the financial strength ratings (FSR) of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of the life/health and property/casualty operating subsidiaries of Colonial Group International Limited. The outlook for all ratings is stable.

Colonial Group is a wholly owned intermediate holding company of Edmund Gibbons Limited, the ultimate parent company. All companies are domiciled in Bermuda, unless otherwise specified.

Best said the “rating affirmations reflect the adequate risk-based capitalization at most of the Colonial Group subsidiaries, consistent increase in their total consolidated equity and diversified business profiles, with their focus being on life/health and property/casualty markets in Bermuda, the Bahamas, Cayman Islands and the Caribbean.

“Colonial Group’s life/health subsidiaries have reported favorable underwriting results in their most recent year with the exception of Colonial Life Assurance Company Limited (Colonial Life), which reported a net loss in 2011 due to a lack of critical mass. Despite operating results and risk-adjusted capitalization at Colonial Life having improved in 2012, its operations, which represent a relatively small part of the overall group operations, remain a challenge.

“Generating favorable operating results at Colonial Life should provide the basis for its capitalization to strengthen organically in the near future. Colonial Medical Insurance Company Limited (Bermuda) and Atlantic Medical Insurance Limited (Bahamas) are regional companies with a continued strong presence in their respective health markets. On a net income and underwriting basis, the life/health subsidiaries’ combined results continue to be strong, but top line growth remains a challenge, mostly due to a weak economic environment.”

Best indicated that within the property/casualty operations, Colonial Group’s three operating subsidiaries, Colonial Insurance Company Limited, British Caymanian Insurance Company Limited and Security and General Insurance Company Limited (Bahamas), “have generally demonstrated good underwriting results and improved operating performance trends while continuing to benefit from being part of the overall Colonial Group.

“Furthermore, the property/casualty subsidiaries benefit from Colonial Group’s reinsurance leverage that manages its global property/casualty risks, which allows the subsidiaries to grow direct premium revenues in their core markets.”

As partial offsetting factors Best cited “Colonial Group’s significant concentration risk in the health line of business in several geographic regions, its vulnerability to frequency and severity of catastrophic events within its property/casualty business and specific large inter-company balances.”

In addition Best indicated that the Group “is well positioned for its current rating level. Key rating factors that could lead to negative rating actions include a deterioration in the group subsidiaries’ risk-adjusted capital position, operating losses and increases in inter-company balances.

Best summarized the companies affected by its rating actions as follows:
The FSRs of ‘A-‘ (Excellent) and ICRs of “a-” have been affirmed for the following life/health and property/casualty operating subsidiaries of Colonial Group International Limited:
— Colonial Medical Insurance Company Limited
— Atlantic Medical Insurance Limited
— Colonial Life Assurance Company Limited
— Colonial Insurance Company Limited
— British Caymanian Insurance Company Limited
— Security and General Insurance Company Limited

Source: A.M. Best

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