M Best has clipped Guardian Life of the Caribbean's financial strength rating from A to A-, a grade that still ranks the Trinidad-based company among the 'excellent' in insurance.

But AM Best, which also assigned a new issuer credit rating of A-, down from A, to GLOC, says its outlook on the company has been revised to negative.

The insurance rating agency also reaffirmed ratings for Guardian General Insurance Limited (GGIL) of A- for financial strength and a- for issuer credit, but also said outlook for the company was negative.

Both GLOC and GGIL are subsidiaries of Guardian Holdings Limited, an insurance conglomerate whose holdings span the Caribbean, United States and Europe.

New Jersey-based AM Best said its outlook on the companies arose from concerns about the growing indebtedness of the publicly traded parent.

"Among these concerns are the increased financial leverage at GHL occasioned by the large decline in the consolidated equity of GHL in 2008 and 2009, primarily due to realised and unrealised investment losses, and goodwill impairments; the exposure to the Jamaican investment market through the assets held in its insurance operations; and GHL's evolving business profile," said the rating agency's review issued Wednesday.

The impairment to goodwill - resulting in a writedown of TT$256.6 million at year end December 2008 - is linked to Guardian Holdings European property and casualty business, the statement said, while "soft prices" on the Caribbean side have also placed limits on top-line income.

Profit drop

GHL's revenues in 2008 reached TT$6.78 billion, from which profit earned topped TT$204 million. But in the first quarter ending March 2009, while the insurance conglomerate increased revenues from TT$1.36 billion to TT$1.46 billion, net profit dove from TT$50 million in the 2008 period to TT$16 million, largely the result of a near TT$98 million writedown of assets.

GHL is also parent to Guardian Life Limited based in Kingston.

AM Best says its ratings of GLOC acknowledges its "strong competitive advantage in the Caribbean markets and its more than adequate level of risk-adjusted capitalisation", while GGIL is similarly seen as market leader with a strong capital base.

The assessment is tempered somewhat, the rating agency said, by the increased frequency of catastrophic events in the region, and the company's reliance on reinsurance to offset risk.

business@gleanerjm.com