AM Best affirms high rating for Century Insurance

A.M. Best Co. has upgraded the financial strength rating to ‘B++’ (Good) from ‘B+’ (Good) and issuer credit rating to “bbb” from “bbb-” of Century Insurance Company (Guam) Ltd., and has also affirmed the FSR of ‘B+’ (Good) and ICR of “bbb-” of Century Insurance Co., Ltd. (CIC Saipan) of the Northern Mariana Islands. The outlook for all of the ratings is stable.

The ratings for CIC Guam “recognize the significant improvement in the company’s Best Capital Adequacy Ratio stemming from the capital infusion from its immediate holding entity, Tan Holdings Corp.,” Best explained. “To support the business growth of CIC Guam, Tan Holdings infused fresh capital in June 2010, which doubled the company’s paid-up capital and subsequently significantly improved the company’s risk-based capitalization. The ratings for CIC Saipan reflect its leading position in its local non-life market with a market share of 35 percent and its adequate risk-adjusted capitalization, as measured by BCAR.”

In addition Best noted that both ratings “also acknowledge the prudent investment strategy and efforts by management to enhance both companies’ enterprise risk management. CIC Guam and CIC Saipan share the same management team.”

As offsetting factors Best cited “the significant amount of overdue insurance receivables from both companies’ strategic partner, a high expense ratio and an unfavorable geographic concentration of risks in terms of catastrophe exposures. The strategic partner is the single distribution channel of CIC Guam and the major premium contributor of CIC Saipan. The initial agreement with the partner has led to a significant amount of overdue insurance receivables, putting a strain on the growth of the admitted assets and surplus and pressuring management to decrease the level of overdue receivables from its strategic partner. The expense ratio remains high for CIC Guam and CIC Saipan, standing slightly below 60 percent despite management’s initiatives to reduce spending. Going forward, management is expected to continue to tighten its expenditure control. Additionally, somewhat offsetting the favorable rating factors of CIC Saipan is its volatile underwriting performance. CIC Saipan has recorded volatile underwriting results over the past five years as premium size has been reduced and acquisition costs have been maintained at a high level. As the economy in Saipan is expected to continue to be unfavorable in the near term, the underwriting performance will remain unstable in the near term.” [I](Insurance Journal)[/I]