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AM Best Revises Outlooks to Stable for Capital Life Insurance Company Limited

October 11, 2019 GMT

SINGAPORE--(BUSINESS WIRE)--Oct 11, 2019--

AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of C- (Weak) and the Long-Term Issuer Credit Rating of “cc” of Capital Life Insurance Company Limited (CLI) (Papua New Guinea).

The ratings reflect CLI’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 revision of the outlooks to stable from negative reflects AM Best’s expectation that the company’s balance sheet strength fundamentals will demonstrate an improving trend over the medium term.

Risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remained at a very weak level at year-end 2018. This follows an internal control failure that resulted in notable reserve strengthening of the company’s medical portfolio, which led to a significant decline in shareholders’ equity at year-end 2017. The company’s management team has since implemented a number of remedial actions, including large premium rate adjustments and strengthening of policy conditions. AM Best expects these steps to generate additional retained earnings over the medium term, which will bolster prospective risk-adjusted capitalization.

A notable improvement in underwriting performance was seen in 2018, albeit still loss-making. Overall, the company reported an operating loss of PGK 2.2 million (USD 0.7 million) in 2018, as compared with PGK 7.0 million in 2017. AM Best expects CLI to report positive underwriting and operating earnings over the medium term, driven by an anticipated improvement in the performance of its core medical portfolio.

AM Best continues to view CLI’s business profile as limited given the company’s small scale of operations and niche portfolio of business. The company also is viewed to have a moderate level of product concentration and a high level of geographical concentration, with its entire premium base emanating from Papua New Guinea.

AM Best views CLI’s risk management as underdeveloped, with recent internal control failures and deficiencies having caused material volatility in the company’s earnings and capital adequacy. Despite significant management attention on improving the company’s risk management framework and governance, AM Best expects this will take some time to become effective.

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 rating agency and information provider with an exclusive focus on the insurance industry. Visit www.ambest.com for more information.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com:https://www.businesswire.com/news/home/20191011005354/en/

CONTACT: Yi Ding

Financial Analyst

+65 6303 5021

yi.ding@ambest.comMyles Gould

Director, Analytics

+65 6303 5020

myles.gould@ambest.comChristopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.comJim Peavy

Director, Public Relations

+1 908 439 2200, ext. 5644

james.peavy@ambest.com

KEYWORD: EUROPE SINGAPORE ASIA PACIFIC

INDUSTRY KEYWORD: INSURANCE PROFESSIONAL SERVICES

SOURCE: AM Best

Copyright Business Wire 2019.

PUB: 10/11/2019 10:34 AM/DISC: 10/11/2019 10:34 AM

http://www.businesswire.com/news/home/20191011005354/en