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Correction: Fitch Affirms ASM at IFS 'AA+(idn)'; Revises Outlook to Stable
November 7, 2016 / 10:33 AM / a year ago

Correction: Fitch Affirms ASM at IFS 'AA+(idn)'; Revises Outlook to Stable

(The following statement was released by the rating agency) JAKARTA, November 07 (Fitch) This rating action commentary replaces the version published on 2 November 2016 to correct the combined ratio figures. Fitch Ratings Indonesia has affirmed Indonesia-based PT Asuransi Sinar Mas's (ASM) National Insurer Financial Strength (IFS) Rating at 'AA+(idn)'. The Outlook has been revised to Stable from Positive. 'AA' National IFS Ratings denote a very strong capacity to meet policyholder obligations relative to all other obligations or issuers in the same country, across all industries and obligation types. The risk of ceased or interrupted payments differs only slightly from the country's highest rated obligations or issuers. KEY RATING DRIVERS The rating affirmation reflects ASM's strong market franchise and solid capitalisation. It also considers the company's investment risk profile, healthy operating profitability and management of catastrophe risks in the catastrophe-prone Indonesian market. ASM remains Indonesia's leading non-life insurer, with around 9.4% market share based on gross written premiums in 2015. The company's capitalisation, as measured by the regulatory risk-based capital (RBC) ratio, has remained consistently above 200% for the past five years. The RBC ratio slightly declined to 313.3% in June 2016, from 359.9% at end-2015, but ASM is committed to improve its RBC ratio to above 360% by end-2016, underpinned by ongoing surplus growth. The company maintained a stable level of liquid assets, with cash equivalents and fixed-income securities making up more than 75% of its investment portfolio at end-2015. Nonetheless, for business purposes, some of its cash holdings are placed in banks that are rated below investment-grade or unrated. Fitch believes ASM's investment risk remain manageable relative to its capitalisation. ASM's underwriting performance, as measured by its combined ratio, remains below 100%, and was 89% at end-June 2016 (2015: 96%). Steady healthy investment returns and prudent underwriting performance have contributed favourably to the company's bottom-line profitability. Fitch believes ASM's operating performance can continue improving its capitalisation through surplus growth. ASM mitigates its catastrophe risks through proportional and non-proportional reinsurance treaties. ASM's protection limit for 2015 is adequate to cover its aggregate probable maximum loss of its property, engineering and motor lines for a return period of more than 250 years. RATING SENSITIVITIES Key rating triggers for an upgrade include sustainable improvement in ASM's operating performance, with its combined ratio staying consistently below 90%, and a strong capitalisation level relative to its rated peers, with a regulatory capital ratio consistently above 350%. Key rating triggers for a downgrade include significant deterioration in ASM's capitalisation relative to its business profile or deterioration in its operating performance, with a combined ratio above 100% and net premiums written/adjusted equity rising above 2x for a prolonged period. Contact: Primary Analyst Ghaida Gunarti Analyst +62 21 29886814 PT Fitch Ratings Indonesia DBS Bank Tower 24th Floor Suite 2403 Jl. Prof. Dr. Satrio Kav. 3-5 Jakarta, Indonesia 12940 Committee Chairperson Jeffrey Liew Senior Director +852 2263 9939 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. 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. Additional information is available at 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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