AM Best affirms Credit Ratings of CGI subsidiaries

KUALA LUMPUR: AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating (FSR) of C++ (marginal) and the Long-Term Issuer Credit Rating (Long-Term ICR) of ‘b+’ of Capital General Insurance Company Ltd (CGI). The outlook assigned to the ratings of CGI is stable.

It also removed from under review with negative implications and affirmed the FSR of C(weak) and Long-Term ICR of ‘cc’ of Capital Life Insurance Company Limited (CLI) and the outlook assigned to CLI’s ratings is negative.

Both CG I and CL I are subsidiaries of Capital Insurance Group Ltd (CIGL) and domiciled in Papua New Guinea. No rating lift or drag has been applied to either CLI’s or CGI’s ratings in respect of their 100 per cent ownership by CIGL, a statement said.

The latest rating actions follow the conclusion of AM Best’s full assessment of the rating fundamentals of CLI and CGI, which had been placed under review as part of rating actions taken on June 22.

The ratings of CLI reflect its balance sheet strength, which AM Best categorizes as weak, as well as its adequate operating performance, limited business profile and weak enterprise risk management (ERM).

CLI’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), has deteriorated to a very weak level following an internal control failure relating to the processing of medical claims.

The negative outlook assigned to the ratings of CLI reflects the company’s very small absolute capital base, which is viewed to be highly sensitive to any further deterioration in earnings, reserves or other balance sheet items.

Meanwhile, CGI’s ratings reflect its balance sheet strength, which is categorised as strong, as well as its strong operating performance, limited business profile and weak ERM. Its strong balance sheet strength assessment is underpinned by its very strong level of risk-adjusted capitalization.

The company continues to report strong operating performance, as evidenced by a five-year average return on equity of 30 per cent (2013-2017). Despite CGI being a leader in the Papua New Guinea non-life market, it remains small when compared internationally.

AM Best is the world’s oldest and most authoritative insurance rating and information source. More details on www.ambest.com.