OREANDA-NEWS. Fitch Ratings has assigned Thai Reinsurance Public Company Limited (Thai Re) an International Insurer Financial Strength (IFS) rating of 'A-'. The Outlook is Stable.

KEY RATING DRIVERS
The IFS rating reflects Thai Re's strengthening capitalisation, sound risk management approach and Fitch's expectation of gradual improvement in the company's financial performance. The rating also considers Thai Re's established franchise as the only local non-life reinsurer in Thailand.

Thai Re's capital position has been strengthened and is sound after the company raised capital in the last three years via new equity issuance and the sale of stakes in a subsidiary. Fitch expects the company to sustain its capitalisation at a solid level, supported by management commitment to maintain its financial stability. Thai Re's risk-based capital (RBC) ratio was 302% at end-1H15, which was well above the regulatory minimum of 140%. The company has no external debt at the operating level.

Fitch expects Thai Re's financial performance to gradually improve, driven by the company's focus on bottom-line profitability and its diversified business underwriting portfolio. The company has fully paid and reserved all the claims from the Thai flooding disaster of 2011. Furthermore, Thai Re has reduced its exposure in the property sector to less than 10% of the company's net premium written in 2014. Thai Re's combined ratio was 94.2% in 1H15.

Fitch believes Thai Re's risk management approach is prudent, which helps to mitigate risks from potential large losses in the future. The company has put strong emphasis on maintaining its financial stability and has purchased over THB2bn in excess of loss protection against catastrophe events. Its panel of retrocessionaires has a minimum rating of 'A-' on the international rating scale.

Thai Re has 8% market share in total ceded non-life premiums in 2014. The company supports the domestic insurers' underwriting capacity and has strong relationships with them due to its long established track record. The company also has 24.8% ownership in Thaire Life Assurance Public Company Limited (Thaire Life), the only local life reinsurer in Thailand. Thaire Life has 20.7% market share in total ceded life premiums in 2014.

RATING SENSITIVITIES
Key rating triggers for a downgrade include a significant deterioration in the reinsurer's capitalisation and financial performance as reflected in the RBC ratio dropping below 250% and the combined ratio increasing to above 105% for an extended period.

If Thailand's Long-Term Local-Currency Issuer Default Rating (IDR) of 'A-' with Stable Outlook is downgraded, the IFS rating on the insurer is also likely to be lowered.

An upgrade is unlikely in the near term as Thai Re's International IFS rating is at the same level as Thailand's Long-Term Local Currency IDR.