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 Concurrently, these ratings have been withdrawn as the company has requested to no longer participate in AM Best’s interactive rating process.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.
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