Best’s News & Research Service - June 02, 2022 09:09 AM (EDT)
AM Best Affirms Credit Ratings of PT Asuransi Tokio Marine Indonesia
- June 02, 2022 09:09 AM (EDT)
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 Tokio Marine Indonesia (TMI) (Indonesia). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect TMI’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). In addition, the ratings factor in rating enhancement from Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF), which is the main insurance operating entity of Tokio Marine Holdings, Inc. (TMH).
TMI’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which is expected to remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). In addition, TMI has a typically conservative investment portfolio composed of mainly government bonds, cash and deposits. Partially offsetting balance sheet factors include the company’s moderate dependence on reinsurance and elevated counterparty credit risk given its exposure to domestic (re)insurance counterparties that are not rated on an international financial strength rating scale.
AM Best assesses the company’s operating performance as strong, as demonstrated by a five-year average combined ratio of 86% and return-on-equity ratio of 17% (2017-2021). The company’s underwriting performance remained robust in 2021, supported by an improvement in the loss experience of its fire and motor insurance lines, although offset in part by higher losses arising from marine insurance. AM Best expects the company’s expense ratio to increase over the medium term driven by higher management expenses and net acquisition costs arising from planned business volume expansion through its digital distribution channel. Notwithstanding this, overall underwriting performance is expected to remain favourable. TMI’s investment yield from government bonds and deposits declined in 2021 driven by the low interest rate environment in Indonesia, and could remain constrained over the near term although its investment results are expected to remain supportive of overall earnings.
TMI’s business profile is viewed as limited. TMI is a small-sized, non-life insurer in Indonesia, with a domestic market share of 2.5%, as measured by 2021 gross premium written. AM Best views the company’s portfolio to be moderately diversified by line of business with key lines including fire, marine and motor insurance, although with a geographic concentration in Indonesia. TMI benefits from preferential access to Japanese-related risks in Indonesia given its affiliation and common branding with TMH.
AM Best considers the company’s ERM to be appropriate and its risk management framework to be established. The company also benefits from risk management oversight and governance from its parent group through collaboration and consultation with its regional head office, Tokio Marine Asia Pte. Ltd.
TMI’s ratings incorporate rating enhancement in consideration of its ultimate majority-ownership by TMH, as well as to reflect the implicit and explicit support that the company receives from the Tokio Marine group. In addition to receiving technical support in relation to underwriting and risk management activities, the company also benefits from intra-group reinsurance and a parental guarantee provided by TMNF. Despite TMI’s operations accounting for a small component of the group’s consolidated revenue and earnings, it continues to serve an important role to provide insurance coverage to Japanese clients that operate in Indonesia.
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.