SINGAPORE–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) 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 assesses as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management. The ratings also recognise implicit and explicit support from the company’s ultimate parent, Tokio Marine Holdings, Inc. (TMH), of which the main operating entity is Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF).
AM Best views the company’s balance sheet strength as strong, underpinned by risk-adjusted capitalisation that remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). TMI’s capital adequacy is supported by its comprehensive reinsurance programme and conservative investment portfolio, which includes mainly cash, deposits and government bonds. However, offsetting balance sheet factors include the company’s moderate dependence on reinsurance to manage its exposure to catastrophe events, accumulations and large single property risks in Indonesia. In addition, the company continues to exhibit a notable credit exposure to domestic (re)insurers, which are not rated on an international financial strength rating scale.
The company’s strong operating performance is demonstrated by its ability to outperform the industry average consistently over the past five years. Between 2016 and 2020, TMI’s average combined ratio was below 90% and its average return-on-equity ratio was approximately 16%. Favourable technical results were mainly supported by the strong performance of the company’s Japan-related business, albeit partially offset by domestic business that experienced intense market competition. While the COVID-19 pandemic induced an economic slowdown that hampered TMI’s growth considerably in 2020, particularly for motor business, the company recorded an improved loss ratio for this retail line of business, which contributed to an overall combined ratio of approximately 85% in the year. Despite continuing uncertainties amid the ongoing pandemic and low interest rate environment, AM Best expects TMI to be able to maintain strong overall profitability over the intermediate term.
AM Best views TMI’s business profile as limited. Given the company’s affiliation with the TMH group, TMI benefits from preferential access to Japan-related businesses in Indonesia, which supports premium volume and profitability. However, the company remains a relatively small player in Indonesia’s non-life market in terms of gross written premium (GWP). All of TMI’s business originates from its domestic market, with property, motor and marine business accounting for approximately 86% of GWP in 2020.
TMI’s ratings also incorporate a rating enhancement from the TMH group. In particular, TMI benefits from explicit support provided by TMNF in the form of a parental letter of guarantee and an intra-group reinsurance arrangement, as well as implicit support through operations management and oversight of underwriting, reserving and risk management activities.
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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