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5 months ago
Fitch Upgrades Tugu Reasuransi Indonesia to IFS 'A+(idn)'; Outlook Stable
March 8, 2017 / 8:25 AM / 5 months ago

Fitch Upgrades Tugu Reasuransi Indonesia to IFS 'A+(idn)'; Outlook Stable

(The following statement was released by the rating agency) JAKARTA/SINGAPORE, March 08 (Fitch) Fitch Ratings Indonesia has upgraded PT Tugu Reasuransi Indonesia's (Tugu Re) National Insurer Financial Strength (IFS) Rating to 'A+(idn)' from 'A(idn)', with a Stable Outlook. 'A' National IFS Ratings denote a strong capacity to meet policyholder obligations relative to all other obligations or issuers in the same country, across all industries and obligation types. However, changes in circumstances or economic conditions may affect the capacity for payment of policyholder obligations to a greater degree than for financial commitments denoted by a higher rated category. KEY RATING DRIVERS The upgrade reflects improved sustainability in Tugu Re's underwriting performance as well as Fitch's expectation that Tugu Re's capital position will continue to improve, supported by capital injections and surplus growth. The rating is constrained by Tugu Re's business concentration in the catastrophe-prone Indonesian market and small asset size compared with some of its local peers. Almost 100% of Tugu Re's underwriting business is sourced from Indonesia, and around 90% of the business from the non-life segment. This leaves the company exposed to greater volatility in its underwriting business because Indonesia is designated as a catastrophe-prone market. The company held around 15% of the total gross premiums written among the local reinsurers at end-2015. The risk-based capital ratio at end-2016 was 167% (end-2015: 183%, 2014: 143%), in excess of the minimum regulatory requirement of 120%. In the near term, the company is committed to record a RBC ratio above 200%, supported by an additional capital injections from its parent company. Fitch expects TuguRe to improve its capital position to keep up with its business expansion and ensure sufficient capital buffers against adverse shocks, in view of regulatory changes encouraging greater optimisation of domestic reinsurance capacity. The company's investment portfolio remained liquid; with fixed-income securities, cash, and bank deposits accounting for more than 80% of its invested assets at end-2016. Overall, the company holds substantial risky assets in its portfolio relative to its adjusted equity and its peers' portfolios. The company's 'combined ratio' (sum of loss ratio and expense ratio of the non-life business) had improved to 87% by end-2016 from 97% at end-2015. The company aims to enhance the stability of its underwriting businesses. The Stable Outlook reflects Fitch's expectation that Tugu Re will manage the risks of its underwriting businesses, and will maintain a prudent retrocession programme and sufficient capital buffer to support its operations. RATING SENSITIVITIES Downgrade Key rating triggers would include: -Drop in Tugu Re's capital (with an RBC ratio consistently below 160%), coupled with -Deterioration in the company's operating performance with a combined ratio of above 105% on a prolonged basis. A rating upgrade is unlikely in the near term, constrained by Tugu Re market position and business scale. Contact: Primary Analyst Jessica Nina Pratiwi Analyst +62 21 2988 6816 PT Fitch Ratings Indonesia DBS Bank Tower 24th Floor Suite 2403 JI. Prof. Dr. Satrio Kav 3-5 Jakarta, Indonesia 12940 Committee Chairperson Siew Wai Wan Senior Director +65 6796 7217 Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(idn)' for National ratings in Indonesia. Specific letter grades are not therefore internationally comparable. Applicable criteria, 'Insurance Rating Methodology', dated 15 September 2016 and "National Scale Ratings Criteria", dated 30 October 2013, are available on www.fitchratings.com. Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 15 Sep 2016) here National Scale Ratings Criteria (pub. 30 Oct 2013) here Additional Disclosures Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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