AM Best Affirms Credit Ratings of Tugu Insurance Company Limited

HONG KONG–()–AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Tugu Insurance Company Limited (TIC) (Hong Kong). The outlook of these Credit Ratings (rating) is stable.

The ratings reflect TIC’s balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, limited business profile and marginal enterprise risk management (ERM).

TIC’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), remained at the strongest level and is supportive of the strong balance sheet strength assessment. Over the past five years, the company’s capital and surplus experienced some volatility, mainly due to revaluation gains or losses arising from its concentrated investment properties, while the underwriting results remained marginal.

TIC’s overall profitability over the past few years was affected by significant reserve movement, and some large losses from its commercial lines of business, for example, property damage, goods in transit, and employees’ compensation. TIC has materially scaled down its construction employees’ compensation business and made significant reserve releases over the past few years, despite the benefit of reserve releases being more subdued in 2021. While TIC reported robust premium growth rate in 2021, it continued to record an elevated level of expense ratio due to the small premium base. The company’s operating profitability is supported by its investment return, which mainly consists of a stable stream of rental income, dividend, and interest income. The annual revaluation of TIC’s investment properties may pose some volatility to its net profits or losses from year to year. AM Best expects TIC’s overall profitability to remain thin over the next few years.

TIC remains a small player in Hong Kong’s highly competitive and fragmented non-life market. Over the past few years, the company ceased retaining or significantly reduced exposures to some unprofitable lines. While oil and gas business from its parent company, PT Pertamina (Persero), continued to form a large proportion of its underwriting book, TIC expands more actively in other overseas business, such as goods in transit, and domestic Hong Kong business over the short to intermediate term.

TIC’s risk management framework continues to evolve. The company has refined its risk appetite statements and risk policies, performed multiple stress and scenario tests, and projected its capital position under the upcoming regulatory solvency requirements with the assistance of external consultants.

Positive rating actions could occur if TIC demonstrates sustained enhancement of its ERM with consistent improvement of its underwriting results. Negative rating actions could occur if there is a material decline in the company’s risk-adjusted capitalisation, for example, due to adverse reserve movements or a significant decrease in the market value of its investment properties.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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