The national scale IDR currency financial strength rating accorded to PT Avrist Assurance (“Avrist”) has been affirmed at A (single A).
The Indonesian life insurance industry, comprising of 46 market participants, grew by an estimated 25% in 2010, with total gross premiums amounting to IDR65,427bn (US$7.2bn). This notwithstanding, penetration remained subdued for the year, at 1%.The life insurance industry has expanded its footprint primarily via investment-based offerings, utilising financial market instruments in the form of unit-linked products (“ULPs”) bundled into investment plans. In this regard, ULPs accounted for approximately 62% of new premiums generated by the industry as a whole in 2010, with ULP-based premiums representing approximately half of industry GWP for the year. Furthermore, the industry has increased utilisation of bancassurance distribution channels (given the depth of market reach afforded by this outlet) as a means of maximising market exposure and competitiveness.
Avrist accounted for approximately 2.5% of the Indonesian life insurance market in 2010, with its strategic focus aimed largely at the middle-class individual segment. The insurer’s established market position and experience in the Indonesian life insurance industry was positively considered. Furthermore, Avrist has managed the new branding activation well (following the separation from previous shareholder American International Assurance), with relatively limited impact onmarket share.The insurer has been consistently profitable at the operating line, underpinned by an efficient and competitive cost structure. Additionally, the ratio of benefits to income has been contained within a relatively narrow band over the review period.
The insurer’s statutory valuation ratios have been recorded at healthy levels relative to risk-based capital requirements, with a further strengthening in CAR cover anticipated in F11. Additionally, Avrist’s exposure to capital market volatility in terms of market-linked products is limited by the transfer of risk exposure to policyholders, with the associated assets and liabilities ring-fenced from the life fund.
The Indonesian life insurance market is expected to grow by a robust 30% in 2011, underpinned by strong demand from the middle class, coupled with bullish expectations in terms of capital market returns. While the overwhelming majority of Avrist’s volumes in F10 stemmed from ULP products (with the heavy weighting giving rise to a potentially greater degree of premium volatility in the short to medium term), a key strategic target going forward centres on increasing the volume of traditional life products (sold through both agency and bancassurance outlets).
Marc Chadwick https://globalratings.net/uploads/files/October_2011.pdf
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