28.08.2015, 12:09
Fitch Affirms Thai Life Insurance at 'A-'; Outlook Stable
OREANDA-NEWS. Fitch Ratings has affirmed Thai Life Insurance Public Company Limited's (TLI) International and National Insurer Financial Strength (IFS) ratings at 'A-' and 'AAA(tha)', respectively. The Outlook is Stable.
KEY RATING DRIVERS
The ratings reflect TLI's solid financial performance, low asset risk and strong capitalisation. The ratings also consider the company's solid domestic market franchise. TLI is the third-largest life insurer in Thailand by total premiums with 12.5% market share in 2014 (January to June 2015: 12.2%).
TLI's strong market position is underpinned by its long-established franchise and its large agency network nationwide. It has the second-largest market share in premiums sold through agents - 20% in 2014. TLI has expanded its non-agency distribution channels in the last few years although its market share in these channels remains small.
TLI's five-year average (2010-2014) pre-tax return on assets at 2.4% (1Q15 annualised: 3.1%) reflects its consistent financial performance and sound profitability. The company's total premiums grew 14.6% (industry: 13.9%) in 2014, with 96% of the premiums being regular premiums, indicating growth is sustainable.
TLI's asset allocation for its investments is mainly unchanged and remains conservative. Fixed income securities, cash and deposits represented about 85% of the company's invested assets at end-1Q15. Furthermore, allocation to equities remains well below 10% of its total invested assets.
TLI's Prism Factor-Based Capital Model (Prism FBM) score was 'Extremely Strong' based on its 2014 financials. Fitch expects TLI's 2015 results will place it in the 'Extremely Strong' range. In particular, TLI's Prism FBM results are supported by a high level of equity capital. The company's capital ratio based on risk-based capital (RBC) was 474% at end-1Q15, much higher than regulatory minimum of 140%.
TLI acquired the remaining 50% it did not already own in Thai Cardif Life Assurance (TCLA), Thailand's 13th-largest life insurer by total premiums, in April 2015. The acquisition will help to expand TLI's non-agency distributions as TCLA has existing partnerships with some major leasing and consumer finance companies in Thailand. TLI also has a strategic partnership with Meiji Yasuda Life Insurance Company (MYL; IFS: A/Stable), which includes MYL owning 15% of TLI.
RATING SENSITIVITIES
Key rating triggers for a downgrade include a material decline in its capital buffer that can be seen in its RBC ratio dropping below 250% for an extended period, and a sustained weakening in profitability that is reflected in pre-tax return on assets remaining below 1%.
The IFS rating on the insurer is also likely to be lowered if Thailand's Long-Term Local-Currency Issuer Default Rating (IDR) of 'A-' with Stable Outlook is downgraded.
An upgrade is unlikely in the near term as TLI's International IFS rating is at the same level as Thailand's Long-Term Local Currency IDR. TLI's National IFS is already at the highest possible level.
KEY RATING DRIVERS
The ratings reflect TLI's solid financial performance, low asset risk and strong capitalisation. The ratings also consider the company's solid domestic market franchise. TLI is the third-largest life insurer in Thailand by total premiums with 12.5% market share in 2014 (January to June 2015: 12.2%).
TLI's strong market position is underpinned by its long-established franchise and its large agency network nationwide. It has the second-largest market share in premiums sold through agents - 20% in 2014. TLI has expanded its non-agency distribution channels in the last few years although its market share in these channels remains small.
TLI's five-year average (2010-2014) pre-tax return on assets at 2.4% (1Q15 annualised: 3.1%) reflects its consistent financial performance and sound profitability. The company's total premiums grew 14.6% (industry: 13.9%) in 2014, with 96% of the premiums being regular premiums, indicating growth is sustainable.
TLI's asset allocation for its investments is mainly unchanged and remains conservative. Fixed income securities, cash and deposits represented about 85% of the company's invested assets at end-1Q15. Furthermore, allocation to equities remains well below 10% of its total invested assets.
TLI's Prism Factor-Based Capital Model (Prism FBM) score was 'Extremely Strong' based on its 2014 financials. Fitch expects TLI's 2015 results will place it in the 'Extremely Strong' range. In particular, TLI's Prism FBM results are supported by a high level of equity capital. The company's capital ratio based on risk-based capital (RBC) was 474% at end-1Q15, much higher than regulatory minimum of 140%.
TLI acquired the remaining 50% it did not already own in Thai Cardif Life Assurance (TCLA), Thailand's 13th-largest life insurer by total premiums, in April 2015. The acquisition will help to expand TLI's non-agency distributions as TCLA has existing partnerships with some major leasing and consumer finance companies in Thailand. TLI also has a strategic partnership with Meiji Yasuda Life Insurance Company (MYL; IFS: A/Stable), which includes MYL owning 15% of TLI.
RATING SENSITIVITIES
Key rating triggers for a downgrade include a material decline in its capital buffer that can be seen in its RBC ratio dropping below 250% for an extended period, and a sustained weakening in profitability that is reflected in pre-tax return on assets remaining below 1%.
The IFS rating on the insurer is also likely to be lowered if Thailand's Long-Term Local-Currency Issuer Default Rating (IDR) of 'A-' with Stable Outlook is downgraded.
An upgrade is unlikely in the near term as TLI's International IFS rating is at the same level as Thailand's Long-Term Local Currency IDR. TLI's National IFS is already at the highest possible level.
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