Credit Ratings of PT Asuransi Tugu Pratama Indonesia Tbk Affirmed by AM Best
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) for PT Asuransi Tugu Pratama Indonesia Tbk (TUGU). The outlooks for the FSR and Long-Term ICR are negative, while the outlook for the NSR is stable.
These ratings reflect TUGU’s robust financial standing, including its very strong balance sheet strength, strong operating performance, and effective risk management strategies. Additionally, the ratings take into account a neutral impact from TUGU’s majority parent, PT Pertamina (Persero) (Pertamina), a state-owned energy company in Indonesia.
TUGU’s balance sheet strength is bolstered by its solid risk-adjusted capitalization, which AM Best anticipates will remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s investment portfolio is considered to carry moderate risk, with a well-diversified allocation primarily in bonds and time deposits, and a smaller portion in investment properties and equities. While TUGU’s exposure to reinsurance is necessary to manage large commercial risks, including in fire, aviation, and energy sectors, it does rely on reinsurance to mitigate the risk of catastrophic events. Although most reinsurance assets are of strong credit quality, TUGU does maintain some exposure to counterparties that lack international financial strength ratings.
AM Best evaluates TUGU’s operating performance as strong, reflecting its consistent record of healthy earnings. A key driver of this performance is profitable business stemming from its parent company, Pertamina. In 2023, TUGU’s profit after tax rose to IDR 1.3 trillion (USD 91.1 million), marking a 229.5% increase compared to 2022. This jump was largely due to a one-off gain from a longstanding litigation case. While TUGU expects continued improvement in its underwriting results in 2024, these earnings may still experience volatility, as observed in recent periods, particularly due to the impact of portfolio remediation efforts.
TUGU’s business profile is considered neutral. The company is one of the largest insurers in Indonesia, ranking fifth in terms of market share in the domestic general insurance sector in 2023. In addition to its core insurance business, TUGU also operates in the reinsurance market through its subsidiary, Tugu Re. The company has a strong market position in commercial and industrial risks, particularly in sectors like energy, aviation, and marine hull. TUGU’s access to business from the Pertamina group further supports its business growth. Over time, TUGU plans to expand its reach by growing its presence in the reinsurance and Credit retail insurance markets.
The ratings provided by AM Best are communicated to the rated entities prior to publication, ensuring the entities have an opportunity to review and comment on the ratings. Unless otherwise stated, the ratings were not amended after this communication.
AM Best is a global credit rating agency, news publisher, and data analytics provider specializing in the insurance industry. Headquartered in the United States, AM Best operates across more than 100 countries, with regional offices in key financial centers such as London, Amsterdam, Dubai, Hong Kong, Singapore, and Mexico City.
For more detailed rating information and disclosures, readers are encouraged to visit AM Best’s Recent Rating Activity web page. For further guidance on how to properly use Best’s Credit Ratings, Performance Assessments, and press releases, AM Best’s Guide to Proper Use of Best’s Ratings & Assessments is available for reference.
Overall, AM Best’s affirmation of TUGU’s ratings underscores the company’s financial Credit resilience, strong operational track record, and strategic position within the Indonesian insurance market. Despite some challenges, including the potential volatility in underwriting performance, TUGU is well-positioned to maintain its strong standing in the industry, backed by solid regulatory compliance and a focus on business diversification.
