OREANDA-NEWS. Fitch Ratings Indonesia has affirmed PT Maskapai Reasuransi Indonesia Tbk's (Marein) National Insurer Financial Strength (IFS) Rating of 'A+(idn)'. Fitch Ratings has also affirmed the company's international IFS Rating of 'BB-'. The Outlooks are Stable.

'A' National IFS Ratings denote a strong capacity to meet policyholder obligations relative to all other obligations or issuers in the same country, across all industries and obligation types. However, changes in circumstances or economic conditions may affect the capacity for payment of policyholder obligations to a greater degree than for financial commitments denoted by a higher rated category.

KEY RATING DRIVERS
The company's ratings reflect Marein's business concentration in Indonesia, which is considered a catastrophe-prone market. The company has narrower geographical diversification compared with some of its Asian reinsurance peers. The ratings also consider Marein's overall market position and asset size, which is small compared with some of its peers locally and within the region, although it has a long operating track record. Fitch also takes into account the company's conservative investment portfolio, strong capitalisation, and sound operating performance.

Marein is the fourth-largest domestic reinsurer with a market share of around 15% by total industry gross written premiums (GWP) as of end-2014. The management has said that the company is focused on creating a sound bottom-line performance as opposed to mere top-line growth through prudent underwriting. More than 75% of the company's GWP were derived from the life reinsurance business at end-2014. Fitch believes that Marein could benefit from growth in its non-life business, which would create a more balanced business portfolio and strengthen its overall market position in the Indonesian reinsurance market.

The company's investment portfolio has remained conservative. Cash and cash equivalents made up the majority of the company's total invested assets as of end-2014 and as of end-August 2015. Around 66.9% of the cash is placed with banks that are rated below investment-grade as of end-2014. Marein's exposure to risky investments has been kept at a minimum relative to its equity, although the company increased investments in mutual funds and properties in 2014.

Marein has maintained a sound capitalisation, as measured by its risk-based capitalisation (RBC) ratio, which amounted to 229% as of end-August 2015. This level is well above the minimum regulatory requirement of 120%, supported by the company's efforts to strengthen its capitalisation through on-going surplus growth.

Its operating performance has remained healthy, underpinned by the company's prudent underwriting, steady investment return and focus on bottom-line performance. The company's combined ratio (aggregate of the non-life incurred loss and expense ratio) has been kept at below 80% as of end-2014, well below the median ratio guideline for its rating category.

The Stable Outlook reflects Fitch's expectation that Marein will continue to maintain sufficient capital buffers and prudent underwriting practices to support its operations and business expansion.

RATING SENSITIVITIES
Key rating triggers for an upgrade include enhancement of the company's fundamentals, which include strengthening its market franchise and successful diversification to a more balanced business portfolio while maintaining a healthy operating performance and capitalisation.

Key rating triggers for a downgrade include significant deterioration in operating performance with a combined ratio consistently higher than 100%, and a weakening capitalisation with the local statutory ratio below 180% on a sustained basis. Material deterioration in market franchise could also lead to a rating downgrade.