AM Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent), the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” (Excellent) and the Indonesia National Scale Rating (NSR) of aaa.ID (Exceptional) of PT Asuransi Tugu Pratama Indonesia Tbk (TUGU) (Indonesia). The outlooks of the FSR and Long-Term ICR are negative while the outlook of the NSR is stable.

The Credit Ratings (ratings) reflect TUGU’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management. The ratings also factor in a neutral impact from TUGU’s ultimate majority parent, PT Pertamina (Persero) (Pertamina), a state-owned energy company in Indonesia.

TUGU’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which is expected to remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best views TUGU’s investment portfolio to be of moderate risk and generally diversified, with the majority of investments allocated to bonds and time deposits and the remainder held in investment properties and equity investments. An offsetting factor is TUGU’s dependence on reinsurance to support the underwriting of large commercial risks, including fire, aviation and energy business, and to manage its exposure to severe catastrophe events. The majority of reinsurance assets are of good credit quality, although TUGU maintains some exposure to reinsurance counterparties that are not rated on an international financial strength rating scale.

AM Best views the company’s operating performance as strong, demonstrated by its good track record of robust earnings, supported in part by profitable business from its parent group, Pertamina. Profit after tax increased to IDR 1.3 trillion (USD 91.1 million) in 2023, an improvement of 229.5% when compared with 2022, largely driven by a one-off gain from a long-standing litigation case. Improvement in the full year 2024 underwriting performance result is expected to be supported by ongoing portfolio remediation measures; however, technical earnings may remain volatile over the near term, as has been witnessed in recent periods.

AM Best considers TUGU’s business profile to be neutral. TUGU is a large insurance organisation in Indonesia, ranking fifth by market share in 2023 in the domestic general insurance market, and additionally writes reinsurance through Tugu Re. TUGU has a strong market position in commercial and industrial risks, including the energy, aviation and marine hull business segments, and continues to benefit from favourable business access to affiliated business from the Pertamina group. Business diversification is expected to be supported by strategic expansion to the reinsurance sector and retail business over time.

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.

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