HONG KONG–(COMMERCIAL WIRE)–I am better has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Tugu Insurance Company Limited (TIC) (Hong Kong). The outlook for these Credit Ratings is stable.
The ratings reflect the strength of TIC’s balance sheet, which AM Best views as strong, as well as its marginal operating performance, limited business profile and marginal enterprise risk management (ERM).
TIC’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remained at the strongest level and supports the strong balance sheet strength assessment. Over the past five years, the company’s equity and surplus have experienced some volatility, primarily due to appreciation gains or losses on its concentrated investment properties, while underwriting results have remained marginal.
TIC’s overall profitability in recent years has been affected by significant booking movement and some large losses from its commercial lines of business, for example property damage, goods in transit and employee compensation. TIC has significantly scaled back its construction employee compensation business and made significant booking releases in recent years, even though profit from booking releases was more moderate in 2021. While TIC reported a strong rate of premium growth in 2021, continued to post an increased expense ratio level due to the small premium base. The company’s operating profitability is supported by the return on its investment, which consists primarily of a steady stream of rental income, dividends and interest income. The annual revaluation of TIC investment properties may cause some volatility in your net gains or losses from year to year. AM Best expects overall ICT profitability to remain poor for years to come.
TIC remains a small player in Hong Kong’s highly competitive and fragmented non-life market. In recent years, the company stopped retaining or significantly reduced exposures to some unprofitable lines. While the oil and gas businesses of its parent company, PT Pertamina (Persero), continued to form a large proportion of its underwriting portfolio, TIC is more actively expanding into other businesses abroad, such as goods in transit, and domestic business. in Hong Kong in the short term. at intermediate term.
The ICT risk management framework continues to evolve. The company has refined its risk appetite statements and risk policies, performed multiple stress tests and scenarios, and projected its capital position under upcoming regulatory solvency requirements with the assistance of external consultants.
Positive rating actions could occur if TIC demonstrates sustained improvement of its ERM with consistent improvement of its technical results. Negative rating actions could occur if there is a material decline in the company’s risk-adjusted capitalization, for example, due to adverse reserve movements or a significant decline in the market value of its investment properties.
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