BOGOTA, Colombia--(BUSINESS WIRE)--Fitch Ratings has affirmed the Insurer Financial Strength (IFS) rating at 'BBB' and the National IFS rating at 'AAA(col)' of Black Gold Re Limited (BGRe). The Rating Outlook is Positive.
Key Rating Drivers
BGRe's rating is tied to the rating of its shareholder, Empresa Colombiana de Petroleos - ECOPETROL S.A. (Ecopetrol). On March 8, 2013, Fitch revised the Outlook of Ecopetrol to Positive from Stable due to the change in the Colombian Sovereign's Rating Outlook to Positive.
BGRe's rating as a captive company continues to reflect its strong linkage and strategic importance to its parent, Ecopetrol. The rating also reflects BGRe's adequate technical performance, high capitalization, low leverage and strong liquidity ratios.
BGRe maintains its position as a core subsidiary of Ecopetrol, due to its strategic importance in managing the risks and structuring the insurance coverage of Grupo Empresarial Ecopetrol. The support of the shareholder is evidenced by its explicit commitment of support through promissory notes, formal support in managing the investment portfolio of the captive, providing resources for the optimal operation of the reinsurance company, and the transference of strong corporate governance practices.
BGRe's operational profitability is adequate for its business profile. BGRe reported a net income of USD $14.5 million at Dec. 31, 2012, 11% higher than the previews year. This performance was benefited from the increase in commissions due to the change in the placement scheme carried out from 2011, and also by greater surety bond premiums given the important growth shown by the hydrocarbon sector in the Colombian economy. At March 31, 2013 the net income was USD$ 2.4 million and the combined ratio stood at 13%.
Black Gold's capital position is strong. At March 31, 2013, the equity was USD145 million with low Leverage ratios. The retained premiums-to-capital ratio was 0.07x and the Liability/Equity ratio was 0.10x. The maximum loss exposure per event is 9% of the equity, which is high compared with other similar companies in the region. Black Gold provides surety bond coverage that very large relative to its capital base. However, Ecopetrol provides an explicit formal guarantee of these policies.
Rating Sensitivities
The Rating Outlook is Positive. An upgrade may be considered due to positive changes in the credit profile of the parent.
Key rating triggers that may lead to a downgrade include a decrease in Ecopetrol's availability and willingness to provide support, which Fitch believes is unlikely.
Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (Jan. 11, 2013).
Applicable Criteria and Related Research
Insurance Rating Methodology - Amended
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=698731
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=790609
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