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A.M. Best Assigns Ratings to Capital Life Insurance Company Limited
[December 24, 2014]

A.M. Best Assigns Ratings to Capital Life Insurance Company Limited


A.M. Best has assigned a financial strength rating of B- (Fair) and an issuer credit rating of "bb-" to Capital Life Insurance Company Limited (CLI) (Papua New Guinea). The outlook assigned to both ratings is positive.

CLI is incorporated in Papua New Guinea and a wholly owned subsidiary of Capital Insurance Group Limited, which is owned by four long-established Papua New Guinea organizations of a much larger financial size: Teachers Savings and Loan Society Limited (TISA), Nambawan Super Limited, Credit Corporation Limited and National Superannuation Fund (NASFUND).

The ratings assigned to CLI mainly reflect the company's sound risk-adjusted capitalization. The positive outlook reflects the strong growth of its premium volume, driven primarily by the company's group life and medical business.

On a risk-adjusted basis, CLI's absolute capitalization is adequate to support its net required capital, as evaluated by Best's Capital Adequacy Ratio (BCAR). Although investment in locally listed equities represent a relatively high percentage of its total investments, underwriting leverage remains conservative, and the operation has no major exposure to volatile lines. Hence, CLI's overall capitalization is deemed adequate to support its overall underwriting and asset risks.

Since fiscal year 2012, both premium revenue and policies have expanded rapidly. As this small operation continues to grow, the underwriting results are expected to continue benefiting from a more consistent claim experience and a lower expense ratio.

Partially offsetting these positive rating facors are the significant concentration risk in CLI's distribution strategy and the risk of change regarding the implementation of its aggressive growth strategy.



The majority of CLI's business is sourced from a single broker that contributes over 50% of gross premium written. This poses some inherent distribution concentration risk.

Due to a lack of a track record of stable operating performance, there is uncertainty over whether the company can execute its business plan successfully and consistently meet its planned operating performance.


Upward rating movement could occur if CLI can continue to meet its financial objectives and improve the diversification of its product and distribution mix. However, a major operating loss or material deterioration in risk-based capitalization could result in negative rating pressure.

The methodology used in determining these interactive ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

• Evaluating Country Risk

• Rating Members of Insurance Groups

• Risk Management and the Rating Process for Insurance Companies

• Understanding Universal BCAR

Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to rating(s) 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 visit A.M. Best's Ratings & Criteria Center.

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

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


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