SINGAPORE--(BUSINESS WIRE)--AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb+” of PT Asuransi Jasa Indonesia (Persero) (Jasindo) (Indonesia). The outlook of the FSR remains stable.
The ratings reflect Jasindo’s balance sheet strength, which AM Best categorizes as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The revision of the Long-Term ICR outlook reflects AM Best’s expectation of a decline in the company’s technical performance for full year 2018, following reserving adjustments across its underwriting portfolio, as well as from a deterioration in attritional loss experience for motor business. In addition, the revised outlook reflects the expectation of a substantial rise in the company’s reinsurance asset leverage at year-end 2018.
Although Jasindo’s underwriting performance has been strong historically, as evidenced by a five-year average combined ratio of 89% (2013-2017), there are growing concerns over a negative trend in performance fundamentals given continued competitive market conditions and the potential for further unfavorable reserve movements.
The company’s risk-adjusted capitalization continues to be categorized as strongest, reflecting a combination of low underwriting leverage and a conservative investment strategy. An offsetting balance sheet factor is Jasindo’s reinsurance asset leverage, which has been the highest among Indonesia’s large non-life insurers in recent years. In addition, a sizable portion of the company’s reinsurance recoverables arise from counterparties that are of lower credit quality, based on international standards.
AM Best views Jasindo’s business profile as neutral. The company is the third-largest non-life insurer in Indonesia, based on 2017 gross written premiums. As a state-owned entity, the company benefits from preferential access to underwriting corporate risks from other state-owned enterprises.
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