SINGAPORE--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” 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 categorizes as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management. In addition, the ratings factor in the implicit and explicit support provided by Tokio Marine Holdings, Inc. (TMH), the ultimate majority owner of TMI.
TMI’s balance sheet strength assessment is underpinned by risk-adjusted capitalization that remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Capital adequacy is supported by the company’s conservative investment portfolio and moderate underwriting leverage. While the company has exhibited a high dividend payout ratio over recent years, retained earnings have remained sufficient to support business growth. Other balance sheet considerations include the company’s moderate dependence on reinsurance to manage its exposure to catastrophe events, accumulations and large single property risks. As a result of local regulations that require a portion of reinsurance coverage to be placed with domestic (re)insurers, TMI continues to have a notable exposure to counterparties, which are non-rated on an international financial strength rating scale.
AM Best views TMI’s operating performance as strong. The company has a track record of consistent and favorable underwriting and operating profitability, with a five-year average combined ratio of 85% and return on equity ratio of 16% (2014-2018). Over this period, underwriting results have been supported by the strong performance of Japanese-related risks, particularly from the property class of business. However, the company’s motor portfolio, its largest line of business in 2018, remains underperforming with a combined ratio that has exceeded 100% over recent years. Overall earnings continue to benefit from stable investment income, arising largely from interest on the company’s cash and domestic government bond holdings.
AM Best assesses TMI’s business profile as limited. The company is a small-sized insurer with a non-life market share in Indonesia of 2.3% based on gross written premium (GWP). The company’s affiliation with TMH continues to give it preferential access to Japanese-related risks in Indonesia. In 2018, all business originated from the domestic market, with motor, property and marine business accounting for approximately 90% of GWP.
AM Best considers the company’s approach to risk management to be appropriate given the size and complexity of its current operations. TMI also benefits from a level of risk management oversight and governance from the TMH group.
TMI’s ratings incorporate rating enhancement from its ultimate majority ownership by TMH. Despite TMI’s operations accounting for a small component of the group’s consolidated revenue and earnings, it continues to play a role in TMH’s international strategy to expand the group’s operations within Southeast Asia. TMI continues to benefit from a combination of implicit and explicit support from the TMH group. This includes technical support in regard to underwriting and risk management activities. In addition, the company benefits from intra-group reinsurance and a parental guarantee.
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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