OREANDA-NEWS. Fitch Ratings has affirmed PT FWD Life Indonesia's (FWD Life Indonesia) National Insurer Financial Strength (IFS) Rating at 'A(idn)'. The Outlook is Stable.

'A' National IFS Ratings denote a strong capacity to meet policyholder obligations relative to all other obligations or issuers in the same country, across all industries and obligation types. However, changes in circumstances or economic conditions may affect the capacity for payment of policyholder obligations to a greater degree than for financial commitments denoted by a higher rated category.

KEY RATING DRIVERS

The rating affirmation reflects FWD Group's commitment to provide capital and operational support to FWD Life Indonesia, which Fitch views as credit positive. However, the rating is constrained by the company's short operating record, associated business execution risks and small market position in the competitive life insurance market in Indonesia.

FWD Life Indonesia is 50.1% owned by FWD Group, which has insurance businesses across Asia. FWD Life Indonesia continues to draw on its parent's marketing and operational resources, including risk management and information technology. It changed its legal name to PT FWD Life Indonesia from PT Finansial Wiramitra Danadyaksa in August 2015 to more closely align its business with the FWD brand. Fitch believes the synergies and sharing of technical know-how with the parent could help the life insurer build up its business franchise.

We expect FWD Life Indonesia's capitalisation to remain stable as it expands, underpinned by ongoing capital injections from its parent. The company's capitalisation, measured by regulatory risk-based capital, was well above the regulatory minimum of 130% at end-December 2015.

FWD Life Indonesia reported a net operating loss in 2015 due to higher costs associated with brand building, network expansion and other operating expenses. The company plans to focus on sales of regular-premium unit-linked policies and protection-based products in the employee benefit segment to improve profitability. It will support this by continuing to expand its tied agency, bancassurance and e-commerce channels. Failure to execute its business plans appropriately and successfully could negatively impact the company's financial stability.

FWD Life Indonesia obtained its insurance licence in February 2013, and started writing business in 2014. It captured about IDR20bn of new business premiums at end-2015. Its market share, measured by life gross premiums, was less than 1% at end-September 2015 and it has a smaller absolute market size in terms of total assets and equity compared to its peers.

RATING SENSITIVITIES

Key rating triggers for a downgrade include a perceived weakening of support from FWD Group. Weaker-than-expected business growth and/or market franchise, poor operating performance over a prolonged period or significant deterioration in capitalisation, with the regulatory capital ratio persistently below 200%, could also lead to a rating downgrade.

Key rating triggers for an upgrade include a significant and sustained improvement in the company's standalone profile over the next three to five years in terms of market franchise, business growth and profitability, with ROE consistently above 5%.