AM Best Downgrades and Withdraws Credit Ratings of Capital General Insurance Company Limited

Business Wire

SINGAPORE--(BUSINESS WIRE)-- AM Best has downgraded the Financial Strength Rating to C (Weak) from C+ (Marginal) and the Long-Term Issuer Credit Rating to “ccc” from “b-” of Capital General Insurance Company Limited (CGI) (Papua New Guinea). The outlook of these Credit Ratings (ratings) remains negative. Concurrently, these ratings have been withdrawn as the company has requested to no longer participate in AM Best’s interactive rating process.

The ratings reflect CGI’s balance sheet strength, which AM Best categorizes as weak, as well as its adequate operating performance, limited business profile and weak enterprise risk management. The ratings factor in a neutral impact from the company’s 100% ownership by Capital Insurance Group Limited.

The rating downgrades reflect a deterioration in AM Best’s view of CGI’s operating performance and balance sheet strength fundamentals. The company’s underwriting and operating performance metrics have exhibited a high degree of volatility over a number of years. Most recently, a notable increase in large loss activity arising from the company’s property portfolio during the second half of 2019 is expected to drive a material pre-tax operating loss for full-year 2019. A number of single large property losses, principally arising from fire events, have triggered the company’s reinsurance protection multiple times during the second half of 2019. While the majority of gross losses are expected to be absorbed by its reinsurance coverage, AM Best expects the company to incur sizable reinsurance reinstatement costs during the period.

As a result of the aforementioned pre-tax operating loss expected for 2019, which falls materially outside of AM Best’s prior expectations, the company is expected to report a notable decline in shareholder’s equity at year-end 2019. Consequently, CGI’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), continues to depict a high level of volatility and trend negatively.

The negative outlooks reflect AM Best’s expectation of continued pressure on risk-adjusted capitalization over the medium term and ongoing volatility in operating performance metrics.

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 Understanding 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.

AM Best is a global credit rating agency, news publisher and data provider specializing in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.