MPM Insurance seen to maintain cautious investment moves, balance risky assets – Fitch Ratings

The insurer sustained a sufficient capital buffer, with a regulatory risk-based capital (RBC) ratio consistently above 250%.

MPM Insurance’s high exposure to reinsurance recoverable, at 131% in December 2023, poses a concern, especially with the deteriorating credit quality of some domestic reinsurers, Fitch Ratings said.

However, MPM Insurance has sustained a sufficient capital buffer, with a regulatory risk-based capital (RBC) ratio consistently above 250% over the past five years, standing at 293% at the end of December 2023.

MPM Insurance's investment portfolio remains liquid, with cash equivalents and fixed-income securities averaging around 80% from 2021 to 2023. The company is expected to continue prudent investment practices and manage exposure to risky assets.

Fitch has assigned MPM Insurance a “moderate” company profile rating, reflecting its moderate business profile and governance compared to other Indonesian insurers. 

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Despite having an adequate business franchise and diversified business lines, MPM Insurance's market share in gross written premiums (GWPs) was only about 1% in December 2023, indicating a small market size compared to major domestic insurers.

In December 2023, MPM Insurance saw a 4% decline in overall GWP growth, mainly due to reduced exposure to multipurpose credit insurance, which accounted for only 0.2% of GWP. This insurance type, covering loan repayments in case of a policyholder's death, had higher losses recently, especially related to COVID-19 claims. 

The company is focusing on reducing its multipurpose credit insurance while increasing its motor business. Despite the decline in certain areas, MPM Insurance has maintained healthy profitability, with a combined ratio of 95% in December 2023 and an average of 91% over the past three years.