12 Jul 2013 11:19
KUALA LUMPUR, July 12 (Bernama) -- A.M. Best Asia-Pacific Limited has upgraded the issuer credit rating (ICR) to “bbb+” from “bbb” 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 “bbb-” of Century Insurance Company Ltd. (CIC Saipan) (Commonwealth of the Northern Marianna Islands) (CNMI). The outlook for these rating is stable. CIC Guam’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 Guam’s capitalization level has substantially improved since the additional capital injection of USD five million from THC in 2010. The company’s favorable operating results in the last three years have further enhanced its capital position. CIC Guam’s risk-adjusted capitalization, as measured by Best’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 company’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 Guam’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 Guam’s management continues to look into various means of cost savings and is working with its general agents to reduce days in receivables. CIC Guam’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 company’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 capitalization level. Conversely, negative rating actions could occur if there is a material decline in the company’s risk-based capitalization level or a significant deterioration in its operating performance. CIC Saipan’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 Saipan’s risk-based capitalization, as measured by BCAR, is adequate to support its ratings. Given its modest business projections, the company’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 company’s dominant position in the market. Offsetting rating factors include CIC Saipan’s volatile underwriting results, unfavorable loss reserve development and the economic downturn in Saipan. CIC Saipan’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 Saipan’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 company’s risk-adjusted capitalization declines to a level below A.M. Best’s expectations or if its operating performance deteriorates significantly. The methodology used in determining these interactive ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology. 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. Copyright ©2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED. SOURCE : A.M. Best Company, Inc. FOR MORE INFORMATION, PLEASE CONTACT: A.M. Best Company, Inc. NAME : Yanwei You TEL : +852-2827-3421 Associate Financial Analyst E-MAIL : yanwei.you@ambest.com or NAME : Jeff Yeung TEL : +852-2827-3413 Associate Director E-MAIL : jeff.yeung@ambest.com or NAME : Rachelle Morrow TEL : +(1) 908 439 2200, ext. 5378 Senior Manager, Public Relations E-MAIL : rachelle.morrow@ambest.com or NAME : Jim Peavy TEL : +(1) 908 439 2200, ext. 5644 Assistant Vice President, Public Relations E-MAIL : james.peavy@ambest.com --BERNAMA