Best Affirms Tugu “B+” Ratings

September 5, 2005

A.M. Best Co. announced that it has affirmed the financial strength rating of “B+” (Very Good) of Hong Kong-based Tugu Insurance Company Limited (Tugu) with a stable outlook.

“The rating reflects Tugu’s improving operating performance, strong capitalization and financial flexibility with a conservative investment portfolio,” said Best.

“Tugu has improved its operating results over the past two years,” Best noted. “For fiscal years 2003 and 2004, the company achieved a recovery of positive earnings from an underwriting loss despite the negative growth in gross premiums written. The continuous investment returns also made substantial contributions to the company’s bottom line profit margin.

“The Best’s Capital Adequacy Ratio, which measures capitalization on a risk-adjusted basis, reflected Tugu’s solid capital position with a low net premium leverage ratio of 0.33 times in fiscal year 2004.

“Driven by the conservative investment strategy, Tugu’s operating cash flows have been maintained at a good degree of financial flexibility. The company does not have any exposure to equity markets. Its investment portfolio is mainly denominated in U.S. dollars, which minimizes the currency exposure.”

However, Best indicated that offsetting factors “include the small market presence in Hong Kong and concerns related to the business operation of Pertamina, Tugu’s parent company. With limited presence in Hong Kong’s fragmented general insurance market, as well as Pertamina’s emerging market exposure in Indonesia, Tugu’s growth prospects and ability to strengthen its business portfolio will be a challenge.”

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