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 categorises 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., of which the main operating entity is Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF).
TMI’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). TMI’s capital adequacy is supported by its conservative investment portfolio, which includes mainly cash, deposits and government bonds. However, offsetting factors include company’s moderate dependence on reinsurance and notable credit exposure to domestic reinsurers, which are non-rated on an international financial strength rating scale.
AM Best assesses TMI’s operating performance as strong. The company has outperformed the industry average in terms of combined ratio, which has remained below 90% for the past three years. Overall profitability has remained robust, with five-year average (2014-2018) return on equity ratio of 16%. Japanese-related property risks, which generate favourable reinsurance commission income, have contributed significantly to the overall underwriting results. More recently, the improved performance of its marine cargo and personal accident business lines has further enhanced underwriting gains. However, a major line of business, motor insurance, remains under pressure with combined ratio of almost 100% in 2019, a result of strong market competition and high acquisition costs. Whilst TMI expects some level of volatility in results across lines of business, its overall combined ratio is projected to remain in line with prior years. TMI’s earnings continue to benefit from favourable investment results in the form of stable interest income from bank deposits and government bonds.
AM Best continues to view TMI’s business profile as limited. In 2019, the company ranked 12th in Indonesia’s non-life insurance segment with a market share of 2.2%, based on gross written premium (GWP). The company’s affiliation with TMH continues to give it preferential access to Japanese-related risks in Indonesia. All of TMI’s business originates from its domestic market, with property, motor and marine business accounting for approximately 92% of GWP.
The ratings include enhancement from the ultimate parent. Despite being a small part of the overall enterprise, TMI provides the parent with an opportunity to offer services to Japanese clients with operations in Indonesia and the ability to expand into Indonesia’s fast-growing market. TMI benefits from the explicit support by TMNF in the form of a guarantee letter and intra-group reinsurance, 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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Tran Nhat Trung
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Director, Public Relations
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