RPT-Fitch Affirms Adira Insurance at IFS 'AA(idn)'; Outlook Stable
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Dec 17 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed Indonesia-based PT Asuransi Adira Dinamika's (Adira Insurance) National Insurer Financial Strength (IFS) Rating at 'AA(idn)'. The Outlook is Stable.
'AA' National IFS Ratings denote a very strong capacity to meet policyholder obligations relative to all other obligations or issuers in the same country, across all industries and obligation types. The risk of ceased or interrupted payments differs only slightly from the country's highest rated obligations or issuers.
KEY RATING DRIVERS
The rating reflects Adira Insurance's sound operating performance and prudent investment strategy relative to its peers. The company's gross written premiums grew by around 10% yoy to IDR1.43bn, according to its unaudited financial statements as at end-September 2013. This compared with IDR1.3bn at end-September 2012. Health and motor vehicle insurance are expected to continue being the main growth drivers of its premium income. The demand for the latter is supported by the expectation of steady sales of motor vehicles following government measures introduced in May 2013 to encourage domestic manufacturing of low-cost green cars.
Profitability has remained healthy with return on assets and return on average equity amounting to 9% and 31% respectively, as of end-September 2013 - although net profit for January-September 2013 fell slightly due to lower investment income and higher operating expenses compared with a year earlier.
Adira Insurance has maintained a conservative investment mix with cash and equivalents accounting for 73% of its investment portfolio as of end-September 2013. Its equity portfolio has also been kept to a minimum, at around 1% of its total invested assets. Its business mix has not shown material deviation from the previous year, with motor insurance accounting for 65% of its total gross written premiums as of end-September 2013.
The Stable Outlook reflects Fitch's expectation that Adira Insurance will continue to adopt prudent reinsurance management to mitigate catastrophe risks and maintain sufficient capital buffers to support its business operations.
Key rating triggers for an upgrade include a strengthening market franchise and a successful diversification into non-motor insurance lines, which would translate into a more balanced business mix while maintaining healthy operating profitability.
Key rating triggers for a downgrade include deterioration in the insurer's financial fundamentals, such as a weakening in its underwriting margin (with a combined ratio consistently higher than 100%, compared with 86.6% at end-September 2013) and a sharp decline in its local statutory risk-based capitalisation (RBC) ratio to a level consistently below 200% (end-September 2013: 206%).
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