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 'A-'. The Outlooks on the ratings are Stable. The senior unsecured debt issued through Ageas Capital (Asia) Ltd has also been affirmed at 'A-'.

KEY RATING DRIVERS

AICA is a wholly owned subsidiary of Netherlands-based parent Ageas Insurance International N.V. (Long-Term IDR 'A'/Stable). Fitch views AICA as 'Very Important' to the group; and, as such, accords AICA an IFS Rating of 'A', which is one notch above our standalone IFS assessment of 'A-'.

AICA's standalone rating reflects its sufficient capital buffer, underpinned by low asset risk, moderate growth and satisfactory operating performance. These strengths are offset by its small market position in Hong Kong, and a persisting duration mismatch between assets and liabilities.

AICA's statutory solvency ratio was 296% at end-2014, well above the regulatory preferred benchmark of 150%. However, the ratio remains highly susceptible to a decline in interest rates - due to the assets/liabilities duration mismatch. The company has been reducing the duration gap by lengthening the duration of its assets and launching relatively shorter-duration insurance policies.

AICA's operating performance remained satisfactory in 2014, supported by a positive investment spread and mortality gains. Meanwhile, AICA's value of new business margin (value added by new business divided by present value of new business premiums) declined due to lower interest rates and stronger sales of relatively low-margin savings-type products. The company introduced new products in 2015 to improve the product mix.

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 200%, or pre-tax return on assets below 1%, all on a sustained basis. The ratings would also be downgraded if Fitch views AICA's strategic importance to Ageas to have diminished.