Fitch Affirms Adira Insurance at IFS 'AA(idn)'; Outlook Stable

Fri Aug 29, 2014 3:00am EDT

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(The following statement was released by the rating agency) JAKARTA, August 29 (Fitch) 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 underwriting margin and prudent investment mix. The company posted a sound pre-tax return on assets and return on average equity of 11.1% and 31.1%, respectively at end-2013. Its combined ratio has consistently remained below 85% over the last five years, underpinned by the company's disciplined underwriting practices and claims management. The company's combined ratio at end-March 2014 remained at a manageable level. More than 95% of Adira Insurance's total invested assets at end-2013 were in cash equivalents and fixed-income instruments. The company has kept its exposure to stock investments to a minimum, at less than 5% of shareholder's equity at end-2013. The company's business portfolio is skewed towards motor insurance, with motor vehicle premiums accounting for 63.2% of its total gross premiums at end-2013. The management intends to achieve better diversification through enhancing its distribution channels and IT systems and developing new products. Adira Insurance's capitalisation, as measured by its local statutory risk-based capitalisation, was 212% at end-March 2014, commensurate with its rating category. 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. Adira Insurance was the seventh-largest general insurer in Indonesia as of end-2013 with around 4% market share. RATING SENSITIVITIES Key rating triggers for an upgrade include the company's ability to strengthen its market franchise and further diversify into non-motor insurance on a sustained basis. This would translate into a better business mix, while maintaining healthy operating profitability. Key rating triggers for a downgrade include deterioration in the underwriting margin with a combined ratio consistently higher than 100% (2013: 80.9%) and a sharp decline in the local statutory risk-based capitalisation (RBC) ratio to consistently below 200%. Contact: Primary Analyst Cheryl Evangeline Associate Director +62 21 2988 6814 PT Fitch Ratings Indonesia DBS Bank Tower, 24th Floor, Suite 2403 Jl. Prof. Dr. Satrio Kav 3-5 Jakarta 12940 Committee Chairperson Jeffrey Liew Senior Director +852 2263 9939 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: 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. Additional information is available at Applicable criteria, 'Insurance Rating Methodology - Amended', dated 13 November 2013, are available on Applicable Criteria and Related Research: Insurance Rating Methodology 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.