SINGAPORE - SEPTEMBER 23, 2016
A.M. Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” to PT Asuransi Tugu Pratama Indonesia (TPI) (Indonesia). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect TPI’s good business profile in the profitable commercial segment of Indonesia’s non-life insurance industry, its strong operating performance and favorable risk-adjusted capitalization.
TPI is 65% owned by PT PERTAMINA (PERSERO) (Pertamina), Indonesia’s largest integrated energy company. TPI was established in 1981 to provide insurance for Indonesia’s oil and gas sector, especially for assets owned by Pertamina. While Pertamina’s oil and gas portfolio continues to represent a major source of profitable business, TPI has over the years established a strong presence in other commercial segments of Indonesia’s non-life market such as aviation, engineering and property. The company has a track record of strong profit margins, with pretax results that are significantly boosted by TPI’s large investment portfolio.
The company’s balance sheet strength is also favorable and supportive of its ratings. Net underwriting risk is reduced substantially through reinsurance. TPI’s gross underwriting leverage and reinsurance asset leverage measures are moderate compared with its commercial lines peers, with gross premiums to capital at 1.1 times and reinsurance assets to capital at 1.3 times at year-end 2015.
Offsetting rating factors include TPI’s exposure to reinsurance counterparties that are of lower credit quality by international standards and of much smaller capital size than TPI. Moreover, these counterparties have the same geographic concentration as TPI.
Other offsetting rating factors are TPI’s weak profile in the retail segment and its reliance on Pertamina as the primary source of underwriting profits.
Positive rating actions are unlikely at present.
Negative rating actions could result from a material decline in TPI’s risk-adjusted capitalization due to a substantial increase in TPI’s reinsurance asset leverage or deterioration in TPI’s reinsurance asset quality.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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