HONG KONG, July 21 (Bernama-BUSINESS WIRE) -- A.M. Best has affirmed the financial strength rating (FSR) of B++ (Good) and the issuer credit rating (ICR) of “bbb+” of Century Insurance Company (Guam) Limited (CIC Guam) (Guam). The outlook for the FSR remains stable, while the outlook for the ICR remains negative.
 
The ratings reflect CIC Guam’s improved underwriting performance and sound reinsurance program. The negative outlook for the ICR reflects the company’s declining risk-adjusted capitalization and a significant proportion of overdue premium receivables. New management discarded its initial plan to merge the insurance book of an affiliated company, Century Insurance Company Ltd., into CIC Guam, which would have placed material negative pressure on the company’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio. However, A.M. Best expects CIC Guam’s risk-adjusted capitalization to continue declining based on its business plan. This decrease is mainly due to higher growth in underwriting risk relative to statutory capital and surplus, historically and prospectively. In addition, the decline in statutory capital and surplus since 2013 was mainly due to the increase in non-admitted assets (primarily composed of overdue premium receivables), which was deducted from statutory surplus. CIC Guam’s management will continue to work with its designated managing general agency to reduce the size of overdue receivables going forward.
 
Offsetting these negative rating factors is CIC Guam’s improved underwriting performance in 2015, which was attributed to a decline in the loss ratio and underwriting expense ratio. The company’s balance sheet is also protected from undue catastrophe exposure under the current reinsurance arrangement. Moreover, the company has a track record of receiving capital support from its parent, Tan Holdings Corporation.
 
Positive rating actions could occur if CIC Guam demonstrates improvement in risk-adjusted capitalization through organic capital growth or capital injection, combined with continued improvement in underwriting results. Negative rating actions could occur if CIC Guam’s risk-adjusted capitalization declines to a level that no longer supports its current ratings/or if there is significant deterioration in its operating performance.
 
Ratings are communicated to rated entities prior to publication. 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 see A.M. Best’s Recent Rating Activity web page.
 
A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
 
Copyright © 2016 by A.M. Best Rating Services, Inc. ALL RIGHTS RESERVED.
 
Contacts
A.M. Best
Vivian Cheung
Senior Financial Analyst
+852 2827 3421
vivian.cheung@ambest.com
or
Moungmo Lee
Managing Director, Analytics
+65 6589 8412, ext. 210
moungmo.lee@ambest.com
or
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Source: A.M. Best
 
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http://www.businesswire.com/news/home/20160720005702/en
 
--BERNAMA