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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 (rating) 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 strong balance sheet assessment is supported by its risk-adjusted capitalisation assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital and surplus has been volatile over the past five years, due to the combined effect of unsteady operating results and revaluation gains or losses arising from its concentrated investment properties.

AM Best views TIC’s operating performance as marginal. The company has reported solid premium growth since 2021; nonetheless, it continued to record an elevated level of expense ratio due to its small premium base. The company’s underwriting results have been unstable over the past few years, experiencing large losses from its commercial lines of business including goods in transit and property damage, and significant reserve release from employees’ compensation. TIC’s investment return has been relatively stable, supported by a stream of rental income from its investment properties, coupled with dividends from listed bonds and common shares, as well as interest income from cash and deposits. Annual revaluation of investment properties, on the other hand, adds uncertainty to TIC’s net profits or losses. AM Best expect TIC’s overall profitability to remain thin over the short to medium term.

AM Best assesses TIC’s business profile as limited. The company remains a small player in Hong Kong’s highly competitive and fragmented general insurance market. TIC has downsized or suspended some unprofitable lines significantly over the past few years, including construction employees’ compensation. Whereas the company still obtains a large portion of its gross written premium related to the oil and gas business of its parent company, PT Pertamina (Persero), TIC also is actively growing other lines including goods in transit, other non-parent overseas business, and domestic Hong Kong business.

AM Best view TIC’s ERM as marginal. Underwriting, strategic planning and reserving activities have historically been areas in which the company’s risk management capabilities do not match its profile. Another offsetting factor is the company’s high asset concentration risk in investment properties. To address these concerns, TIC continues to evolve its risk management framework. It has refined its risk appetite statements and risk policies, performed stress and scenario testing, and projected its capital position under the upcoming local risk-based regulatory solvency requirements with the assistance of external consultants. Nonetheless, AM Best expects more time required for TIC to translate these actions into positive business results.

Positive rating actions could occur if TIC demonstrates sustained enhancement of its ERM and achieves consistent improvement of its underwriting results. 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 © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


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