Bangkok--16 Dec--Fitch Ratings
Fitch Ratings has today affirmed Muang Thai Life Assurance Company Limited's (MTL) Insurer Financial Strength (IFS) Rating at 'BBB+', with a Stable Outlook and National IFS rating at 'AA(tha)'. The Outlook on the National IFS rating has simultaneously been revised to Positive from Stable.
The revision to Positive Outlook reflects MTL's strengthened franchise and market position as Thailand's third-largest life insurer, as seen in the steady increase in market share as a result of its successful multi-channel distribution strategy, as well as prudent capital level and sustained profitability improvement. The ratings also take into consideration continuous operational support provided by MTL's minority shareholder, Ageas Insurance International N.V. (Ageas) and Kasikornbank (KBANK: 'BBB+'/Stable), Thailand's third-largest bank.
MTL's financial performance continuously improved from a steady growth in premium and investment incomes and lower expenses. ROAA increased to 2.7% in 2009 (2007-2008: 2.5%). H110 results also showed stronger performance with annualised ROAA of 3.2%. Growth momentum is expected to continue given MTL's strengthened distribution platform, underpinned by an increased strategic tie-up with KBANK, and improved domestic economic outlook.
Fitch notes that MTL faces asset-liability mismatch issues, along with other local and Asian life insurers. The maturity gap between assets and liabilities remains high, though it has gradually declined due to an increased investment in longer-tenor fixed income securities and in low-risk structured products. Meanwhile, its investment strategy remains conservative, with fixed income investments accounting for 84% of total invested assets at end-June 2010. Also, equity and foreign currency investments remain moderate and fully-hedged.
MTL has no outstanding debt, and has no need to raise debt in the short-to-medium term. Its liquidity position has also steadily improved with liquid assets to policyholder liabilities rising to 107.9% at end-June 2010 (2009: 105.0%), and it does not have significant short-term liquidity needs.
MTL's capital position is prudent with solvency ratio at end-June 2010 remaining strong at 877% of minimum regulatory requirement. Based on the EU standard adopted by the Ageas Group, its solvency ratio is also strong at 281%. Fitch expects its capital position to continue to be relatively strong and to be able to support future growth without additional financing need.
The key ratings drivers that could result in a one-notch upgrade of the National IFS rating include further improvement in its franchise and market position in the medium-term, maintenance of prudent capital level and sustainable profitability improvement.
The potential upgrade of IFS rating in the medium-term is unlikely given the wide gap in market position, capital level, and asset size between MTL and the top-ranked peer, as well as its relative position to the local currency sovereign rating ('A-'/Negative). Conversely, a significantly wider gap in these factors could lead to a one-notch downgrade of IFS rating.