|[January 21, 2013]
A.M. Best Assigns Ratings to PT. Asuransi Samsung Tugu
HONG KONG --(Business Wire)--
A.M. Best Asia-Pacific Limited has assigned a financial strength
rating of A- (Excellent) and issuer credit rating of "a-" to PT.
Asuransi Samsung (News - Alert) Tugu (AST) (Indonesia). The outlook assigned
to both ratings is stable.
The ratings reflect AST's robust risk-adjusted capitalization,
profitable underwriting performance, sound reinsurance arrangement and
strong enterprise risk management (ERM) practice. The ratings also
consider the support provided by the shareholders of Samsung Fire &
Marine Insurance Co., Limited (SFM) (South Korea) and PT. Tugu
Pratama Indonesia (TPI) (Indonesia). AST's risk-adjusted
capitalization is expected to improve to a level that supports its
ratings, although its capitalization weakened in the past year due to
increases in both its credit and investment risks. However, the
capitalization is expected to gradually increase, owing to its
consistent profitable operation and conservative investment management.
AST reported strong underwriting profitability in the past five years
with a combined ratio average of 42%, owing to its conservative
underwriting guidance and claims management. In addition, AST started a
robust reinsurance program by further increasing its catastrophe
coverage in 2013 in order to enhance the stability of its underwriting
performance. AST operates a solid ERM system ad its standards are in
line with SFM, which is more conservative than the regulatory base.
Offsetting rating factors are an increase in AST's cost structure and
its historically volatile investment results. AST experienced rapid
rises in expenses because of significant increases in personnel and rent
costs in the past five years. As AST is still on a course of business
expansion, it is inevitable that it will have increases in expenses in
the next two to three years. AST reported volatile investment returns in
the past five years primarily due to the significant changes in foreign
currency rates especially related to transactions in the U.S. dollar,
while its books of accounts are maintained in Indonesian rupiah. In
2012, the company set a more conservative investment strategy to
maintain USD-denominated assets to range between 80% and 120% of
liabilities for better asset and liability management, in addition to a
minimum required amount on USD-denominated assets.
Positive rating pressures may arise if there are improvements in AST's
business profile whilst maintaining a strong level of risk-adjusted
capitalization or there is improvement in the country risk profile of
Indonesia. Downward rating pressures may be triggered by a worsening of
AST's risk-adjusted capitalization or deterioration in its business
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Key criteria utilized include:
"Understanding Universal BCAR"; "Rating Members of Insurance Groups";
"Evaluating Country Risk"; "Catastrophe Analysis in A.M. Best Ratings";
and "Risk Management and the Rating Process for Insurance Companies."
Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS
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