Sony captive rating revised

A.M. Best has revised the outlook to negative from stable and affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of PMG Assurance Ltd. (PMG) (Hamilton, Bermuda).

The ratings reflect PMG’s excellent capitalization, its historically strong operating performance and strategic position as the captive insurance company for the Sony Corporation (Sony). These strengths are partially offset by PMG’s exposure to potentially large natural catastrophe losses. The revised outlook reflects PMG’s exposure to the recent losses experienced by Sony as it faces stiff competition in some key product lines, which has resulted in Sony’s ratings being downgraded by other credit rating agencies, and potential further movement based on concerns about Sony’s overall direction.

PMG’s role is to meet certain global insurance requirements of Sony’s members. PMG’s strengths are derived from its underwriting focus, long-standing customer relationships and conservative operating strategy, and its results have varied in recent years. While it has benefited from rate increases, the company experienced several catastrophe-related incidents in 2011 that had a significant impact on its capitalization. However, PMG was able to withstand this adverse claim experience at the current rating level, and management has ensured A.M. Best of Sony’s commitment to maintain prudent capital levels.

PMG could experience negative rating movement if capital levels do not continue to support its rating level and if Sony’s risk profile continues to deteriorate materially. Positive rating movement is possible if Sony’s overall risk profile improves in the near term.