A.M. Best Assigns Ratings to Capital General Insurance Company Limited

SINGAPORE--(BUSINESS WIRE)-- A.M. Best has assigned a financial strength rating of B- (Fair) and an issuer credit rating of “bb-” to Capital General Insurance Company Limited (CGI) (Papua New Guinea). The outlook assigned to both ratings is stable.

CGI is incorporated in Papua New Guinea and is a wholly owned subsidiary of Capital Insurance Group Limited, which is owned by four long-established Papua New Guinea organizations of a much larger financial size: Teachers Savings and Loan Society Limited, Nambawan Super Limited, Credit Corporation Limited and National Superannuation Fund.

The assigned ratings mainly reflect CGI’s adequate risk-adjusted capitalization, very strong operating performance and good competitive profile in the local insurance market. In addition, the ratings incorporate a view of the company’s exposure to Papua New Guinea, a country that A.M. Best considers to have high economic risk, high political risk and very high financial system risk.

A.M. Best expects CGI’s risk-adjusted capitalization to be maintained at an adequate level. Despite CGI’s rapid expansion plans, the company’s risk-adjusted capitalization is expected to remain supportive of its current rating level, underpinned by robust earnings derived from its strong technical earnings and consistent investment returns. CGI’s operating performance is strong as demonstrated by a five-year average operating ratio below 60% and a five-year return on equity in excess of 20%.

Benefiting from the financial strength of its shareholders, CGI has some competitive advantages in the local general insurance market, primarily in the commercial sector. In addition, the company continually tries to differentiate itself from its competitors with regard to service quality, utilizing quicker response time and prompt claim settlement. Nevertheless, A.M. Best remains cautious of CGI’s inherent distribution concentration risk, particularly in relation to its commercially sourced portfolio, where the company is wholly reliant on a very limited number of international brokers to generate a majority of its premiums.

An offsetting factor in CGI’s rating assessment is its enterprise risk management (ERM), which A.M. Best considers to be relatively underdeveloped. Although some controls and guidelines are in place, which support underwriting, investments and reinsurance placements, the company lacks a stated risk appetite and tolerance statement that allow measuring risks and results against tolerances. Additionally, uncertainty exists as to the adequacy of its reserving strategy, as well as the company’s exposure to catastrophe and event risks.

Upward rating movement could occur if CGI can maintain favorable technical earnings and more supportive risk-adjusted capitalization on a catastrophe stress-tested basis, while demonstrating significant developments in its ERM. Any deterioration in CGI’s operating performance or significant erosion in its risk-adjusted capitalization, as a result of higher-than-expected frequency of claims, could place negative pressure on the ratings.

Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.

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 © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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A.M. Best Company
Jason Shum
Financial Analyst
+65-6589 8400 Ext. 217
[email protected]
or
Chi-Yeung Lok
Senior Financial Analyst
+65-6589 8400 Ext. 211
[email protected]
or
Christopher Sharkey
Manager, Public Relations
+(1) 908 439 2200, ext. 5159
[email protected]
or
Jim Peavy
Assistant Vice President, Public Relations
+(1) 908 439 2200, ext. 5644
[email protected]

Source: A.M. Best Company

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