A.M. Best Assigns Ratings to PT Asuransi Jasa Indonesia (Persero).

OLDWICK, N.J. -- A.M. Best Co. has assigned a financial strength rating of B++ (Good) and an issuer credit rating of "bbb" to PT Asuransi Jasa Indonesia (Persero) (Jasindo) (Indonesia). The outlook for both ratings is stable.

The ratings reflect Jasindo's solid track record of operating performance, sound liquidity, diversified short-tailed insurance book and sound overall operating profitability. The ratings also acknowledge the company's market presence in Indonesia and initiative in expanding its personal lines book.

Jasindo is entirely owned by the government of the Republic of Indonesia. Given its long operating history, the company has accumulated a diversified book of business. In addition to using the conventional intermediary channels, Jasindo disseminates its risk products through banking institutions as well as direct channels, which include 50 branch offices and 39 sales representative offices spread throughout Indonesia and one overseas branch office in Labuan, Malaysia.

Jasindo achieved an average premium growth of 14.3% over the past five years from 2003 to 2007, notwithstanding a slight premium contraction in 2007. With its leading position in aviation, energy and marine hull, the company has captured more than 10% market share, ranking it second in the Indonesian non-life market.

Jasindo's risk-based capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), is commensurate with the assigned ratings, although further business growth could potentially put a strain on the company's financial strength. Jasindo maintains sound liquidity within its invested assets to support potential claims arising from its insurance book. Approximately 30.8% of Jasindo's total assets in 2007 were allocated in cash and time deposits. In light of the recent financial turmoil, Jasindo's investments remained sound for the first nine months of 2008, partially due to its prudent asset mix.

Offsetting factors include volatile net claim experience, a relatively high expense ratio and concentration risk associated with its dependence on several key clients. The ratings also recognize the exposure to catastrophe perils and the intensifying market competition.

Claims experience from aviation, marine hull, energy and property has exacerbated the company's underwriting volatility over the past five years. The company's overall net loss ratio consistently trended upward from 36.9% in 2003 to 52.9% in 2007. Regardless of the inflow reinsurance commission from reinsurers, Jasindo's expense ratio was high relative to that of its Asian peers. A high cost structure along with a volatile underwriting result undermined the stability of Jasindo's underwriting profitability, although a favorable investment return enhanced the company's overall operating profitability in recent years.

Jasindo is subject to the concentration risk in terms of premium source associated with its reliance on a few major corporate clients. Nonetheless, to achieve a better spread of risk and mitigate potential underwriting volatility in relation to its corporate book, Jasindo plans to further expand its retail book going forward. In view of the current competitive market landscape, Jasindo's ability to grow its personal lines book with a profitable result will be crucial in determining the sustainability of its underwriting margin.

As with other non-life market participants in Indonesia, the company is exposed to various catastrophic perils such as volcanic eruptions and tsunamis. Jasindo is heavily dependent on reinsurance coverage as a means to protect its capital base against undue catastrophic risk.

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The principal methodologies used in determining these ratings, including any additional methodologies and factors, which may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.