AM Best has removed from under review with positive implications and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of "bbb+" (Good) of Century Insurance Company (Guam) Limited (CIC Guam) (Guam). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect CIC Guam’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
These ratings were initially placed under review on 3 July 2019, following an announcement that DB Insurance Co., Ltd. (DBI) entered into an agreement with CIC Guam’s parent company, Tan Holdings Corporation (THC), to acquire an 80% stake in each of THC’s three insurance subsidiaries, including CIC Guam and two other insurers in Saipan and Papua New Guinea. Based on AM Best’s recent exchange with company management, THC and DBI have terminated the pending acquisition. This rating action follows AM Best’s completed assessment of CIC Guam’s recent financial condition and the company’s current business plan.
The rating affirmation mainly reflects CIC Guam’s very strong balance sheet strength and adequate operating performance. Overall, risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), is assessed at the strongest level. Disciplined underwriting and pricing continue to drive consistent underwriting performance. Nevertheless, due primarily to a small net premium base, the company’s net underwriting expense ratio was elevated at over 60%, and its operating return on policyholder surplus (which excludes realised capital gains on sold investments) was comparatively lower than the U.S. commercial casualty composite.
CIC Guam mainly focuses on non-life insurance in Guam, primarily on commercial line businesses. There is no significant concentration in its product mix, but the company’s narrow geographic focus is a major factor that has constrained its business profile assessment.
Positive rating actions could occur if CIC Guam can expand its insurance business in a profitable manner, such that it can improve its net underwriting expense ratio or operating return on policyholder surplus to levels that outperform the composite. Negative rating actions could occur if CIC Guam’s risk-adjusted capitalisation declines significantly or if there is a material shift in its risk appetite. Negative rating actions could also arise if there is significant deterioration in the credit profile of its ultimate parent, including its operating profitability, financial leverage and interest coverage levels.
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 Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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