Fitch Affirms MAIPARK at IFS 'BBB+(idn)'; Outlook Stable

Thu Jan 16, 2014 12:31am EST

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(The following statement was released by the rating agency) JAKARTA/SINGAPORE, January 16 (Fitch) Fitch Ratings has affirmed Indonesia-based PT Asuransi MAIPARK Indonesia's (MAIPARK) National Insurer Financial Strength (IFS) Rating at 'BBB+(idn)'. The Outlook is Stable. 'BBB' National IFS Ratings denote an adequate capacity to meet policyholder obligations relative to all other obligations or issuers in the same country, across all industries and obligation types. However, changes in circumstances or economic conditions are more likely to affect the capacity for payment of policyholder obligations than for financial commitments denoted by a higher rated category. KEY RATING DRIVERS The rating reflects MAIPARK's sound operating profitability, prudent investment management and strong risk-based capitalisation. It also takes into account the company's business concentration in reinsuring earthquake risks in the catastrophe-prone Indonesian market. MAIPARK's total gross premiums (including pending policies) grew by 16.99% to IDR105.2bn at end-September 2013 from IDR89.9bn at end-September 2012. This is in line with the growth of the Indonesian insurance market in general. Effective January 2014, the regulator will require all general insurers and reinsurers in Indonesia to cede their earthquake risks to MAIPARK in the amount of 15% of the Total Sum Insured (TSI) with a maximum of USD3.5m on any one risk for all location in Indonesia. This is in contrast to the existing mandatory cession of between 5% and 25% of TSI with maximum of USD2.5m on any one risk. Following the change, MAIPARK's risk exposure will likely increase, and the company's management has indicated that it will restructure its Excess of Loss (XOL) retrocession protection for 2014 based on the updated catastrophe modelling results. MAIPARK's investment portfolio has remained highly liquid and conservative as cash and deposits accounted for more than 90% of its invested assets as of end-September 2013. The Stable Outlook reflects Fitch's expectation that MAIPARK will continue to maintain sufficient capital buffer to support its ongoing business growth and shield itself from potential shocks. MAIPARK's risk-based capitalisation (RBC) ratio amounted to a strong 1080% at end-September 2013, much higher than the regulatory minimum of 120%. RATING SENSITIVITIES Key rating triggers for an upgrade include: - the company's ability to sustain its operating profitability, with a pre-tax return on assets consistently above 20% (end-September 2013: 10.7%), and - enhancement of its risk management capabilities, such as its reserving techniques and catastrophe modeling. Key rating triggers for a downgrade include deterioration in the insurer's financial fundamentals, such as weakening premium sustainability, operating performance and capital relative to business portfolio (with statutory risk-based capital below 250% on a sustained basis) due to excessive growth or claims from catastrophe losses. Contact: Primary Analyst Cheryl Evangeline Analyst +62 21 2988 6814 PT Fitch Ratings Indonesia DBS Bank Tower, 24th Floor, Suite 2403 Jl. Prof. Dr. Satrio Kav 3-5 Jakarta 12940 Secondary Analyst Wan Siew Wai Senior Director +65 6796 7217 Committee Chairperson Harish Gohil Managing Director +44 20 3530 1257 Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(idn)' for National ratings in Indonesia. Specific letter grades are not therefore internationally comparable. Applicable criteria, 'Insurance Rating Methodology - Amended', dated 13 November 2013, are available on www.fitchratings.com. Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable Criteria and Related Research: Insurance Rating Methodology -- Amended here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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