AM Best has upgraded the Financial Strength Rating to B++ (Good) from B+ (Good) and the Long-Term Issuer Credit Rating to “bbb” (Good) from “bbb-” (Good) of PGA Sompo Insurance Corporation (PGA Sompo) (Philippines). The outlook of these Credit Ratings (ratings) has been revised to stable from positive. Concurrently, AM Best has withdrawn these ratings in response to the company’s request to no longer participate in AM Best’s interactive rating process.
The ratings reflect PGA Sompo’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).
The rating upgrades reflect the company’s consistently robust underwriting performance and overall profitability. The company has demonstrated a track record of sound operating profitability over the past five years, with an average return-on-equity ratio of 9.7% and an average combined ratio of -52.2% (2018-2022). Robust underwriting results over this period were driven by favourable reinsurance commission income generated on ceded business. In 2022, the company’s combined ratio remained favourable at -63.4% despite its underwriting result being negatively impacted by a higher expense ratio. AM Best expects PGA Sompo to continue to maintain its underwriting profitability with favourable combined ratios over the medium term. Additionally, healthy investment income continues to contribute to the overall profitability, with a five-year average net investment yield of 2.8% (2018-2022).
PGA Sompo’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which remained at the strongest level at year end 2022, as measured by Best’s Capital Adequacy Ratio (BCAR). Additionally, AM Best views PGA Sompo’s investment portfolio as conservative, with invested assets principally consisting of cash, deposits and fixed-income securities. Offsetting balance sheet strength factors include the company’s small absolute capital base and elevated reinsurance dependence, with over 95% of premiums ceded to reinsurers; albeit a majority is placed with its minority shareholder, Sompo Japan Insurance Inc. (Sompo), which is viewed to present a very low level of counterparty credit risk. Despite being a minority shareholder, Sompo provides both implicit and explicit support to PGA Sompo, which potentially creates additional financial flexibility.
AM Best views PGA Sompo’s business profile as limited. Despite the company benefiting from its affiliation with Sompo, which supports strong access to Japan-related risks in the Philippines, PGA Sompo is considered a small non-life insurer. Based on gross written premium, the company had a domestic market share of approximately 3% in 2022. In addition, the company’s underwriting portfolio is considered concentrated by line of business and geography.
AM Best considers the company’s ERM approach as appropriate given the size and complexity of its current operations. PGA Sompo also benefits from a level of risk management oversight and support from the Sompo group.
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 Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
Xin Ya Ong
Associate Financial Analyst
+65 6303 5024
Associate Director, Public Relations
+1 908 882 2310
+65 6303 5020
Senior Public Relations Specialist
+1 908 882 2318