AM Best Affirms Credit Ratings of PT Asuransi Tugu Pratama Indonesia, Tbk
SINGAPORE--(BUSINESS WIRE)--Oct 11, 2019--
AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of PT Asuransi Tugu Pratama Indonesia, Tbk (TUGU) (Indonesia). The outlook of these Credit Ratings (ratings) is negative.
The ratings reflect TUGU’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The ratings also factor in a neutral impact from the company’s ultimate majority ownership by Indonesia’s government.
TUGU’s balance sheet strength assessment is underpinned by its risk-adjusted capitalization, which remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Internal capital generation over recent years, along with a capital raising in 2018, has strengthened the company’s capital base and continued to support its business expansion. However, a partially offsetting factor is the company’s high usage and reliance on reinsurance to enable the underwriting of large commercial risks, as well as to manage accumulation risks and catastrophe exposure. In addition, AM Best considers the company’s investment risk to be moderate given its notable exposure to higher-risk classes of equities and real estate.
AM Best views TUGU’s operating performance as strong. The company reported five-year average combined and operating ratios of 82% and 64%, respectively (2014-2018). A significant contributor to the company’s underwriting profits has been its corporate business from PT Pertamina (Persero), TUGU’s immediate parent and Indonesia’s national integrated energy company. Despite this, the company’s combined ratio trended upward in 2017 and 2018, affected by the underwriting performance of TUGU’s reinsurance subsidiary, PT Tugu Reasuransi Indonesia (TRE).
AM Best assesses TUGU’s business profile as neutral. In 2018, TUGU’s consolidated gross premium written was USD 356 million, ranking it among the largest non-life insurance companies in Indonesia. Despite its limited presence in the retail sector, the company continues to be a dominant player in commercial aviation, marine, energy and property lines of business. Domestic reinsurance business also has become a significant component of gross and net premium written over recent years, following the company’s consolidation of TRE in 2017.
AM Best views TUGU’s risk management capabilities as appropriate relative to the profile of the key risks associated with TUGU’s standalone operations. However, the effectiveness of enterprise-wide risk management remains under pressure, following an increase in the scope and complexity of the company’s operations as a result of the increase in ownership and subsequent consolidation of TRE.
The negative outlooks reflect AM Best’s ongoing concern over the company’s risk management and its ability to manage its enterprise-wide risks and operations effectively.
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 Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global rating agency and information provider with an exclusive focus on the insurance industry. Visit www.ambest.com for more information.
Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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KEYWORD: EUROPE SINGAPORE ASIA PACIFIC
INDUSTRY KEYWORD: PROFESSIONAL SERVICES INSURANCE FINANCE
SOURCE: AM Best
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PUB: 10/11/2019 10:41 AM/DISC: 10/11/2019 10:41 AM