A.M. Best Upgrades Issuer Credit Rating of PT Asuransi Jasa Indonesia (Persero) [Manufacturing Close – Up]

A.M. Best Asia-Pacific Limited has upgraded the issuer credit rating (ICR) to "bbb+" from "bbb" and affirmed the financial strength rating (FSR) of B++ (Good) of PT Asuransi Jasa Indonesia (Persero) (Jasindo) (Indonesia).

The outlook for the ICR has been revised to stable from positive, while the outlook for the FSR is stable.

The ratings reflect Jasindo's continuing favorable operating performance, prudent investment strategy, as well as its strong market presence in Indonesia.

Jasindo recorded favorable net income and underwriting results in fiscal year 2011, with the combined ratio continuing to improve over the past five years from 102 percent in 2007 to 83 percent in 2011. This is due to the company's efforts in increasing its non- corporate retail production to reduce underwriting volatility and improving customer satisfaction, quality of human resources and cost efficiency to maximize performance.

Jasindo allocates a high proportion of its investments to liquid assets. The company's sound level of liquidity enables it to support the short-tail nature of Jasindo's insurance risks. Steady investment income consistently contributes to the continuous growth of the company's overall earnings.

Jasindo's market presence remains solid. The company was the second-largest non-life insurer in Indonesia, as measured by gross premiums written, with market share of approximately 9 percent in 2011.

Offsetting rating factors include Jasindo's exposure to potential catastrophe perils, the competitive landscape of its core operating market and reserving practices.

Jasindo's exposure to natural catastrophes continues to grow, as there was a severe flood in Jakarta in early January of this year. Managing catastrophe risks remains a key area in the company's enterprise risk management development.

With the increased competition in the national insurance industry, Jasindo is facing challenges to seize the opportunity to maintain profitability and to compete with insurance companies that have strong capital.

Jasindo is well positioned for its current ratings. Negative rating actions could occur if Jasindo's operating performance deteriorates in the coming years or if its risk-adjusted capitalization declines to a level that is below A.M. Best's expectations.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: "Evaluating Country Risk"; "Catastrophe Analysis in A.M. Best Ratings"; "Risk Management and the Rating Process for Insurance Companies"; and "Understanding Universal BCAR." Best's Credit Rating Methodology can be found at www.ambest.com/ratings/ methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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