Correction: Fitch Affirms Black Gold Re Ltd's IFS Rating at 'BBB'; Outlook
BOGOTA -- May 8, 2013
(This is a correction of a release originally issued May 7, 2013. It removes
the reference to BGRe's national IFS rating, which was incorrectly stated to
have been affirmed in the previous version.)
Fitch Ratings has affirmed the Insurer Financial Strength (IFS) rating of
Black Gold Re Limited (BGRe) at 'BBB'. 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
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.
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.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (Jan. 11, 2013).
Applicable Criteria and Related Research
Insurance Rating Methodology - Amended
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