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AM Best Affirms Credit Ratings of Tugu Insurance Company Limited

AM Best 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 of these Credit Ratings (ratings) is stable.

The ratings reflect TIC’s balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, limited business profile and marginal enterprise risk management (ERM).

TIC’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), is assessed at the strongest level and is expected to remain so over the short to intermediate term. Offsetting balance sheet strength factors include the volatility in the absolute capital and surplus size due to underwriting volatility, concentration risk in investment properties, and fair value movements of these properties.

TIC’s marginal operating performance is demonstrated by its volatile bottom line, contributed both from underwriting and investment experience. The company has focused historically on commercial lines. The loss ratio deteriorated in 2021 and 2022 due to some large losses related to the oil and gas business, but it improved in 2023 along with the benefits from some claim reserve releases for previous accident years. However, the company’s operating expense ratio remains high with a limited premium base. Despite stable rental income from its investment properties and interest and dividend income arising from its liquid assets, TIC experienced investment losses in 2022 and 2023 due to a decline in the fair value of investment properties. The company’s overall profitability is expected to remain modest over the intermediate term.

While TIC has a long operating history since its incorporation in 1965, the company remains a small player in Hong Kong’s competitive non-life insurance market. TIC’s ultimate parent company is PT Pertamina (Persero), a state-owned integrated oil and gas company in Indonesia. While TIC obtains a substantial portion of its top line from its parent, it also has expanded other revenue sources actively for more diversification, including overseas business and domestic business in Hong Kong, over the past few years.

AM Best assesses TIC’s ERM as marginal. Key areas of concern include underwriting, investment concentration, strategic planning and reserving capability. To address these concerns, the company has taken remediation actions including developing its risk management framework with refined risk appetite and risk policies, and performing relevant stress and scenario testing to ensure compliance with the latest regulatory requirements and internal concerns. In recent years, more stability is observed in reserve development and underwriting risk control. Notwithstanding its efforts, a longer time horizon is required for the company to translate these actions into improved operating performance.

Positive rating actions could occur if TIC demonstrates consistent enhancement of its ERM. Positive rating actions also may occur if the company can demonstrate sustained improvement in its operating performance, for example, supported by better and more stable underwriting profitability and investment result, including capital gains and losses. Negative rating actions could occur if there is a material deterioration in the company’s risk-adjusted capitalisation, for example, severe adverse reserve movements or significant decline in the market value of its investment properties.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


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