Fitch Ratings Indonesia has assigned PT Kookmin Best Insurance Indonesia (KB Insurance Indonesia) a National Insurer Financial Strength (IFS) Rating of 'AA-(idn)'.
The Outlook is Stable.
The rating reflects a 'Less Favourable' company profile and satisfactory capitalisation, which are offset by a volatile operating performance and low premium retention compared with major domestic peers.
'AA' National IFS ratings denote a very strong capacity to meet policyholder obligations relative to all other obligations or issuers in the same country or monetary union, across all industries and obligation types.
Key Rating Drivers
Operating Synergies with
Less Favourable Company Profile: Fitch ranks
The company was established in 1997 as PT LG Simas Insurance Indonesia and changed its name to PT Kookmin Best Insurance Indonesia after it was acquired by the
Small Business Scale:
Satisfactory Capitalisation:
Large Use of Reinsurance: The company cedes a large share of its premiums to reinsurers as its business is exposed to catastrophe risk due to the high proportion of property insurance in the catastrophe-prone Indonesian market. Its premium retention ratio, the proportion of net premiums written to gross premiums written, averaged 20% over 2017-2021. However, its premium retention ratio increased to 24% by end-2021 (2020: 16%) as its business shifted to motor vehicle insurance, which has had a lower loss ratio compared with the property business.
Fitch believes the premium retention ratio will increase gradually due to the move towards the motor vehicle business as a result of its synergies with the KB group in
Volatile Operating Performance:
Business Expansion through
Conservative Investment Portfolio: The company's investment portfolio is conservative and liquid, with 98% of total invested assets in cash and equivalents and fixed-income securities during 2019-2021. Its exposure to risky assets is kept at a manageable level relative to its equity.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Improvement in the company profile in terms of market franchise and further synergies with the KB group.
An increase in the premium retention ratio above 40% for a prolonged period.
Sustained improvement in operating performance, with a combined ratio below 95%, with return on equity above 5%.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A perceived weakening in the support from its parent company.
Significant deterioration in the company profile, including a shrinking market franchise and weakening synergies with the group.
Deterioration in the premium retention ratio over a prolonged period.
Deterioration in financial performance with a combined ratio persistently above 105%, with return on equity below 1%.
Weakening capitalisation, with the regulatory capital ratio persistently below 300%.
Date of Relevant Committee
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
RATING ACTIONS
Entity / Debt
Rating
PT Kookmin Best Insurance Indonesia
Natl Ins Fin Str
AA-(idn)
New Rating
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