OREANDA-NEWS. Fitch Ratings has affirmed Ageas Insurance Company (Asia) Limited's (AICA) Insurer Financial Strength (IFS) Rating at 'A-' and its Long-Term Issuer Default Rating (IDR) at 'BBB+'. The Outlooks on the ratings are Stable. The senior unsecured debt issued through Ageas Capital (Asia) Ltd has also been affirmed at 'BBB+'.

KEY RATING DRIVERS
The affirmation reflects AICA's sufficient capital buffer, despite persistent duration mismatches between assets and liabilities, and satisfactory operating performance. These are offset by its small market position in Hong Kong.

Fitch expects the company to maintain sufficient capital buffer, underpinned by a small equity investment portfolio and investments in securities with low credit risk. However, the solvency ratio is likely to remain highly susceptible to declines in market rates due to the duration mismatch. AICA's statutory solvency ratio was 352% at end-2015, which is well above the regulatory preferred benchmark of 150%.

AICA's value of new business declined, particularly in the first half of 2015, due to a new regulatory guidance note that impacted the offering of unit-linked products. Sales turned around when the company introduced the new products in the middle of the year. Pre-tax return on assets remained good at 2% for 9M15. Its market share in terms of annualised new business premium equivalent at end-2015 was 1.0%.

Fitch has been rating AICA on a standalone basis since September 2015, after AICA's ultimate parent Ageas SA/NV announced the sale of AICA to China's JD Capital. The transaction is expected to be completed within the first half of 2016, subject to approval from Hong Kong's Office of the Commissioner of Insurance, customary closing conditions and approval from JD Capital's shareholders.

RATING SENSITIVITIES
An upgrade of AICA is unlikely in the near term, given its small market position in Hong Kong.

Key rating triggers for a downgrade would include a decline in AICA's local statutory solvency ratio to below 250%, or pre-tax return on assets below 1%, all on a sustained basis.