A.M. BEST UPGRADES ISSUER CREDIT RATING OF CENTURY INSURANCE COMPANY (GUAM) LIMITED
12 Jul 2013 11:19
KUALA LUMPUR, July 12 (Bernama) -- A.M. Best Asia-Pacific Limited has upgraded
the issuer credit rating (ICR) to â€œbbb+â€ from â€œbbbâ€ and affirmed the financial
strength rating (FSR) of B++ (Good) of Century Insurance Company (Guam) Limited
(CIC Guam). The outlook for the ICR has been revised to stable from positive,
while the outlook for the FSR is stable. A.M. Best also has affirmed the FSR of
B+ (Good) and ICR of â€œbbb-â€ of Century Insurance Company Ltd. (CIC Saipan)
(Commonwealth of the Northern Marianna Islands) (CNMI). The outlook for these
rating is stable.
CIC Guamâ€™s ratings reflect its solid risk-based capitalization, continuous
profitable operating results and the support it receives from its parent
company, Tan Holdings Corporation (THC), in terms of capital injections. CIC
Guamâ€™s capitalization level has substantially improved since the additional
capital injection of USD five million from THC in 2010. The companyâ€™s favorable
operating results in the last three years have further enhanced its capital
position. CIC Guamâ€™s risk-adjusted capitalization, as measured by Bestâ€™s Capital
Adequacy Ratio (BCAR), is solid and supportive of its current ratings.
CIC Guam has recorded positive operating results every year since its inception
in 2006. The companyâ€™s underwriting profits are mainly attributed to its
favorable loss experience as demonstrated by a five-year average loss ratio of
32%. Since CIC Guam diversified its investment portfolio in 2011, the company
has made noticeable improvements in its investment results. In terms of
catastrophe management, CIC Guam has been extensively utilizing reinsurance
programs to mitigate its inherent catastrophe exposures.
Offsetting rating factors include CIC Guamâ€™s high expense ratio, large balance
of overdue insurance receivables and volatile loss reserve development.
CIC Guam maintains a relatively high expense ratio and a large amount of overdue
insurance receivables relative to other insurers in the region. CIC Guamâ€™s
management continues to look into various means of cost savings and is working
with its general agents to reduce days in receivables.
CIC Guamâ€™s loss reserve development has been volatile since its inception as
evidenced by reserve redundancies in its first two years of operation and
deficiencies in its following three years. A.M. Best will closely monitor the
companyâ€™s reserving practices going forward.
Positive rating actions could occur if CIC Guam can continue to improve its
expense management and reduce days in receivables, and at the same time,
demonstrate profitable operating results and maintain a solid risk-adjusted
Conversely, negative rating actions could occur if there is a material decline
in the companyâ€™s risk-based capitalization level or a significant deterioration
in its operating performance.
CIC Saipanâ€™s ratings acknowledge its adequate risk-adjusted capitalization and
leading position in the non-life insurance market in CNMI. Additionally, the
ratings also acknowledge the support it receives from THC.
CIC Saipanâ€™s risk-based capitalization, as measured by BCAR, is adequate to
support its ratings. Given its modest business projections, the companyâ€™s
capitalization level is expected to remain adequate in the near term.
As the first full-fledged insurance company in CNMI, CIC Saipan maintains its
market leadership position on the island. In recent years, the withdrawal of
some competitors from the CNMI market also has strengthened the companyâ€™s
dominant position in the market.
Offsetting rating factors include CIC Saipanâ€™s volatile underwriting results,
unfavorable loss reserve development and the economic downturn in Saipan.
CIC Saipanâ€™s underwriting performance has been volatile in the past five years,
partly due to the relatively small size of its insurance book. In 2012, the
company recorded an underwriting loss due to several large fires on the island.
In addition, CIC Saipanâ€™s loss reserve development has shown an unfavorable
trend in the past three years as evidenced by its reserve deficiencies.
Upward rating actions could occur if CIC Saipan is able to reduce the volatility
in its loss experience and report profitable underwriting results, as well as
maintain its adequate risk-adjusted capitalization level.
Conversely, negative rating actions could occur if the companyâ€™s risk-adjusted
capitalization declines to a level below A.M. Bestâ€™s expectations or if its
operating performance deteriorates significantly.
The methodology used in determining these interactive ratings is Bestâ€™s Credit
Rating Methodology, which provides a comprehensive explanation of A.M. Bestâ€™s
rating process and contains the different rating criteria employed in the rating
process. Bestâ€™s Credit Rating Methodology can be found at
Ratings are communicated to rated entities prior to publication, and unless
stated otherwise, the ratings were not amended subsequent to that communication.
A.M. Best Asia-Pacific Limited is a subsidiary of A.M. Best Company. A.M. Best
Company is the world's oldest and most authoritative insurance rating and
information source. For more information, visit www.ambest.com.
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