SINGAPORE–(BUSINESS WIRE)–#insurance—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 TUGUs 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 companys ultimate majority parent, PT Pertamina (Persero) (Pertamina).
TUGUs balance sheet strength is underpinned by its risk-adjusted capitalisation, as measured by Bests Capital Adequacy Ratio (BCAR), which remains at the strongest level. Capital adequacy is supported by the companys low net underwriting leverage and robust retained earnings over the past five years. In addition, TUGUs local regulatory solvency ratio remains far in excess of the minimum requirement. Partially offsetting balance sheet factors include the companys 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 companys 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 companys reinsurance subsidiary and from the COVID-19 pandemic environment, which caused TUGUs combined ratio to deteriorate in 2020. Nevertheless, during the first nine months of 2021, there has been a level of recovery in the companys 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 companys 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 companys 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 Bests 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 Bests Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Bests Credit Ratings. For information on the proper use of Bests Credit Ratings, Bests Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Bests Ratings & Assessments.
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Contacts
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trung.tran@ambest.com
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