Rating PT Avrist ASSURANCE At IFS 'AA-(Idn)05-02-2013
TEXT-Fitch:Rating PT Avrist ASSURANCE at IFS 'AA-(idn)'; stable
(The following statement was released by the rating agency)
Jan 30 - Fitch Ratings has affirmed National Insurer Financial Strength rating (IFS) PT Avrist Assurance (Avrist) at 'AA-(idn)' with a Stable Outlook.
The ratings consider the track record Avrist as life insurance companies in Indonesia with more than 30 years. Rating also reflects a moderate Avrist market presence, consistent profitability and strong capitalization relative to its operational profile. Avrist business concentration on unit-linked products are usually offered as a substitute for savings products remains a challenge for the sustainability of the company's insurance premiums.
Avrist has a market share of 1.4% of the total premium at the end of Q312. Total direct premiums at the end of November 2012 amounted to Rp1, 246.84bn, in line with the previous year's performance. Insurance companies are able to maintain healthy profitability, with annualized pre-tax return on assets and return on average equity respectively by 3.3% and 14.4% in the same period. This is supported by a stable premium income and investment returns are stable.
In late November 2012, the statutory risk-based capitalization (RBC) remained strong at 683% (2011: 661%). Quality of capital, which consists entirely by equity capital and retained earnings, is considered strong. The company has no debt issuance plans. Avrist a strong balance sheet, with liquid assets amounted to 159.20% of the obligations of the policyholder, to support insurance claims and payment of fine. The mixture of investment at the end of November 2012 remains conservative with stock exposure is kept to a minimum in the amount of 1.47% of total assets invested.
The main trigger for the increased levels of which are improvements in the credit profile, both independently and relative to domestic peers, which can be reflected in a strengthened business franchise and increase market confession. Level can also be increased if the sustainability premium is increased, with a successful product diversification to traditional life protection products, as well as improved operational performance of pre-tax return on Assets consistently above 3.5%.
The main drivers for the downgrade, including the weakening of capitalization to significant business profile consistent with RBC ratios below 300% and a decrease in business performance persistency ratio below 80% within a period of sustained.