October 27, 2017 / 2:07 AM / a month ago

Fitch Assigns Indonesia Re IFS of 'BB+'; Outlook Stable

(The following statement was released by the rating agency) SINGAPORE/JAKARTA, October 26 (Fitch) Fitch Ratings has assigned PT Reasuransi Indonesia Utama (Persero), known as Indonesia Re, an International Insurer Financial Strength (IFS) Rating of 'BB+' with a Stable Outlook. KEY RATING DRIVERS Indonesia Re's ratings reflect strong ties with the Indonesian government (BBB-/Positive), as it is fully state owned. Indonesia Re was merged with PT Reasuransi Internasional Indonesia in 2015 and had a solid domestic market profile as the largest domestic reinsurer by total asset size in 2016. It captured an overall domestic market share of 37% by gross reinsurance premiums in 2016. However, its scale is small compared with regional reinsurance peers, as the majority of reinsurance premiums in Indonesia are ceded to offshore reinsurers. The ratings also factor in strong capital buffers to support ongoing business growth and benefits from regulatory support of local reinsurance capacity optimisation, good financial performance, and high business concentration risk in the catastrophe-prone Indonesian market. Fitch views Indonesia Re's capitalisation as strong. The company's regulatory risk-based capital (RBC) ratio was 315% at end-2016 (end-2015: 1,065%); exceeding the minimum 120% regulatory requirement and commensurate with its rating profile. The decrease in the company's RBC was caused by its business expansion. Fitch will continue to monitor the sustainability of the company's capitalisation to support ongoing business growth in view of regulatory changes to encourage greater optimisation of domestic reinsurance capacity. The company adopts a liquid and prudent investment mix, with more than 80% of its invested assets placed in cash and equivalents and fixed-income securities at end-2016. Indonesia Re's exposure to risky assets, such as stocks and below-investment-grade bonds, is minimal relative to its capitalisation. Indonesia Re demonstrates good financial performance with its combined ratio (aggregate of non-life loss ratio and expense ratio) below 100% over the last two years. This is underpinned by its selective underwriting, steady premium growth and manageable claims. Stable investment returns have also contributed favourably to bottom-line profitability. RATING SENSITIVITIES Upgrade rating triggers include: - Sustainable improvement in capitalisation, with the RBC ratio consistently above 325%, - Consolidated financial leverage below 40%, and - Improved market position while maintaining profitability, with a combined ratio consistently below 90%. Downgrade rating triggers include: - Significant deterioration in the company's credit profile in terms of market franchise, operating performance, and capitalisation relative to its business profile, with a combined ratio persistently above 105%, RBC ratio below 200%, or - Weakening of the company's importance to the state. Contact: Primary Analysts Christopher Han, CFA, CA (International Rating) Associate Director +65 6796 7224 Fitch Ratings Singapore Pte Ltd One Raffles Quay South Tower #22-11 Singapore 048583 Ghaida Gunarti (National rating) Analyst +62 21 2988 6814 PT Fitch Ratings Indonesia DBS Bank Tower 24th Floor Suite 2403 Jl. Prof. Dr. Satrio Kav. 3-5 Jakarta, Indonesia 12940 Secondary Analyst Jessica Pratiwi (International Rating) Analyst +62 21 2988 6816 Committee Chairperson Siew Wai Wan Senior Director +65 6796 7217 Date of the Relevant Rating Committee: 16 October 2017 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. 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