AM Best has assigned a Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) to PT Asuransi Astra Buana (Asuransi Astra) (Indonesia). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Asuransi Astra’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings also factor in a neutral impact from Asuransi Astra’s ultimate parent, Jardine Matheson Holdings Limited (Bermuda).
Asuransi Astra’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which was at the strongest level at 31 December 2021 and is expected to be maintained at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital adequacy is supported by its internal capital generation and low net underwriting leverage. AM Best views Asuransi Astra’s investment portfolio to have moderate risk, comprising mainly bonds held directly and through mutual funds. More than half of its mutual funds are comprised of locally rated bond funds. Due to regulatory requirements, the company has exposure to domestic (re)insurance counterparties, which are not rated on an international financial strength rating scale resulting in higher counterparty credit risk.
AM Best also views Asuransi Astra’s operating performance as strong, demonstrated by its five-year average combined ratio of 88.5% and return-on-equity ratio of 18.0% (2018-2022). Profitable business from its parent group, PT Astra International Tbk (Astra group), is the key contributor to Asuransi Astra’s strong operating performance. This performance remained robust during 2022, as the negative impact of claims normalization on the company’s loss ratio was offset by an improved expense ratio and stronger investment income. Net income for the period was IDR 1.2 trillion (USD 77.7 million) compared with IDR 1.1 trillion in 2021.
AM Best assesses Asuransi Astra’s business profile as neutral. Asuransi Astra is a large insurance organisation in Indonesia, ranking third by market share in 2021 in the country’s general insurance market. The company’s portfolio is diversified by line of business with key lines being motor, personal accident and health, and fire insurance; although there is a geographic concentration in Indonesia. The company has moderate distribution channel concentration to a financial leasing company, mainly in respect of motor insurance. Asuransi Astra benefits from being a subsidiary of the Astra group, having preferential access to business from the Astra group, especially in the motor line of business.
AM Best views the company’s ERM framework as appropriate given the current size and complexity of the company’s operations. Asuransi Astra’s excess of loss reinsurance programme provides appropriate protection for peak earthquake exposures. The company performs stress tests to evaluate the impact of various scenarios on the company’s regulatory capital adequacy.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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Michael Dunckley, CFA
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