Best’s News & Research Service - December 01, 2021 09:41 AM (EST)
AM Best Affirms Credit Ratings of PT Asuransi Tugu Pratama Indonesia Tbk
- December 01, 2021 09:41 AM (EST)
Singapore //BestWire// - AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of PT Asuransi Tugu Pratama Indonesia Tbk (TUGU) (Indonesia). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect TUGU’s balance sheet strength, which AM Best assesses 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 parent, PT Pertamina (Persero) (Pertamina).
TUGU’s balance sheet strength is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which remains at the strongest level. Capital adequacy is supported by the company’s low net underwriting leverage and robust retained earnings over the past five years. In addition, TUGU’s local regulatory solvency ratio remains far in excess of the minimum requirement. Partially offsetting balance sheet factors include the company’s sizable real estate and equity investment holdings, which create a moderate level of investment risk. Furthermore, TUGU is viewed to have high reinsurance usage and dependence to support the underwriting of large commercial risks including aviation and energy business.
The company’s strong operating performance is demonstrated by its favourable five-year average combined and operating ratios (2016-2020), which have benefited from corporate business underwritten from Pertamina. However, this has been offset partially by underwriting losses from the company’s reinsurance subsidiary and from the COVID-19 pandemic environment, which caused TUGU’s combined ratio to deteriorate in 2020. Nevertheless, during the first nine months of 2021, there has been a level of recovery in the company’s revenues and technical results. Whilst the company aims to maintain strong financial results over the medium term, AM Best expects overall profitability to experience some pressure from high operating expenses arising from planned retail business growth, lower investment yields and tightening reinsurance commissions.
AM Best assesses the company’s business profile as neutral in view of its market position and specialty experience. In 2020, the company reported consolidated gross premiums written of IDR 6.1 trillion (USD 431 million) and ranked among the top five companies in the local non-life insurance and reinsurance market. Specialising in commercial and industrial risks, the company dominates the domestic market in the energy, aviation and marine business segments. Prospectively, TUGU is expected to continue expanding its non-energy corporate and retail business to improve the company’s business diversification over the long term.
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 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.