Published on 21 Jan 2022.
RAM Ratings has reaffirmed Credit Guarantee and Investment Facility’s (CGIF or the Fund) AAA/Stable/P1 insurer financial strength ratings on the global, ASEAN and national scales.
The reaffirmation reflects CGIF’s policy mandate to develop the regional bond market as well as the sponsorship and continued support of its capital contributors – the governments of China, Japan, Korea and the ten ASEAN countries (collectively, ASEAN+3) and the Asian Development Bank.
The ratings also consider CGIF’s still-sound financial metrics despite a THB2.78 bil (or USD83 mil) default by KNM Group Berhad in 4Q 2021 – the first in the Fund’s portfolio since its inception. Net of reinsurance arrangements, CGIF’s exposure to the oil and gas issuer stood at around USD62 mil. While the amount of additional provisions required has not been determined, this will crimp the Fund’s earnings for fiscal 2021. Its leverage will however stay largely intact at 1.3 times as at end-December 2021, well within the 2.0 time-limit for its ratings. CGIF continues to maintain a conservative investment appetite while keeping its liquidity profile robust. Highly liquid assets totalled USD1.3 bil as at end-June 2021, providing the Fund with a comfortable buffer to meet potential claims.
CGIF’s modest portfolio and monoline focus exposes it to some degree of concentration risk. The Fund is sufficiently diversified by sector. Although it has a relatively large exposure to Vietnam (29%) and Thailand (19%), geographical concentration has reduced in recent years. As a prudent risk management practice, the Fund has sector and country limits to mitigate concentration risk. CGIF has enhanced credit assessments and actively monitors its insured portfolio, given that operating conditions remain difficult for most countries. We expect the Fund’s financial metrics to stay manageable amid pandemic-led headwinds that have affected companies under its guaranteed portfolio.
Chow Kah Mun
(603) 3385 2501
Wong Yin Ching, CFA
(603) 3385 2555
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Published by RAM Rating Services Berhad
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Ratings on Credit Guarantee and Investment Facility