A.M. Best Removes From Under Review With Developing Implications and Affirms Credit Ratings of Century Insurance Company (Guam) Limited

A.M. Best has removed from under review with developing
implications and affirmed the Financial Strength Rating of B++ (Good)
and the Long-Term Issuer Credit Rating of “bbb+” 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 A.M. Best
categorizes as strong, as well as its strong operating performance,
limited business profile and appropriate enterprise risk management.

CIC Guam’s capitalization level has consistently improved due to the
company’s favorable underwriting and investment performance in recent
years. The company’s consistent positive retained earnings are a
reflection of its emphasis on prudent underwriting and efforts to
improve its claims management, along with its diversified investment
strategy and sound reinsurance program.

The exclusive managing general agent (MGA) agreement that CIC Guam had
relied on heavily for business and distribution support since the
agreement began in 2004 was terminated in October 2017. Subsequently,
the company has entered into multiple brokers’ agreements, of which one
is with its former MGA and another with a newly established and
affiliated broker in Guam. The company expects its former MGA to lead
the premium contribution of its book of business in the future. In 2017
and in the first quarter of 2018, more than 90% of the company’s premium
income was sourced from its former MGA. Following the termination, CIC
Guam also brought the underwriting function in-house and tightened its
underwriting standards.

Offsetting rating factors include the competitive landscape in Guam, the
company’s heavy reliance on its former MGA for business generation and
distribution and execution risk associated with its new distribution and
underwriting strategy. In addition, CIC Guam’s relatively high common
stock leverage adds volatility to its capital base through fluctuations
in unrealized capital gains and losses. A.M. Best expects the company to
continue to address and improve upon past issues of overdue premium
collection and reserve adequacy.

While positive rating actions are unlikely in the near term, negative
rating actions could occur if there is a substantial decline in the
company’s risk-adjusted capitalization due to an adverse deviation in
its underwriting or investment results from its business plan. A
significant deterioration in its business profile or operating
performance due to the change in its distribution strategy also could
add negative rating pressure.

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 A.M. 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 A.M. 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 A.M. Best press releases, please view Guide
for Media – Proper Use of Best’s Credit Ratings and A.M. Best Rating
Action Press Releases.

A.M. Best is the world’s oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

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