Trinidad-based Colonial Life Insurance Company Limited (CLICO) has been downgraded by international credit rating agency AM Best while still remaining under review with negative implications, the ratings agency announced last Friday.

CLICO's financial strength rating has dropped from fair to weak, while its issuer credit rating has dropped to 'ccc' from 'bb'.

The ratings agency said it would issue another assessment once it reviews CLICO's 2008 accounts.

The downgrade comes seven months behind the state rescue of CLICO, sister company British American Insurance and parent CL Financial Group.

CLICO and its investment bank subsidiary were taken over in January after its principals sought the Trinidad government's help.

The Central Bank of Trinidad and Tobago stepped into inject up to US$40 million in an effort to rescue the company.

Its debts have been assessed so far at about US$1 billion.

The downgrade, according to AM Best, reflects the continuing uncertainty over the future of CLICO's fundamental life insurance and annuity businesses, as well as the lag in publication of its financial results.

Neither CLICO nor CL Financial has filed audited financial statements for the period ended December 2008 the rating agency said.

Another CL Financial company, Angostura Limited, has also failed to file its results, and was suspended in July from trading on the Trinidad stock exchange as a result.

"Given the fluid nature of the situation, AM Best has been unsuccessful in receiving updated information or satisfactory levels of dialogue with management," said the ratings agency.

It also contends that CL's investment strategy - with a high concentration in related party assets, including large holdings in the banking and financial services, energy and manufacturing sectors - makes the company difficult to value given the current uncertain economic conditions.

CL Financial Group comprises more than 70 companies in 32 countries.

Financial obligations

It owns 40 per cent of Jamaica Money Market Brokers, and controls 86 per cent of ordinary shares and 92 per cent voting rights in spirits conglomerate Lascelles deMercado and Company.

The downgrade also takes into consideration CLICO's delay in payment of certain financial obligations, but more so premature annuity surrenders.

"AM Best believes that the business profile of the company has been diminished and its future direction is uncertain," the ratings agency said, The agency has, however, taken note of the central bank's commitment to meet the obligations of CLICO's Trinidad & Tobago third-party policyholders and ensure that the existing and future policyholders' funds are safe.

sabrina.gordon@gleanerjm.com