Bangkok--28 Jun--Fitch Ratings
Fitch Ratings has affirmed Muang Thai Life Assurance Company Limited’s (MTL) Insurer Financial Strength (IFS) Rating at ‘BBB+’ with Stable Outlook and its National IFS Rating at ‘AA(tha)’ with Positive Outlook.
The ratings are based on MTL’s strong franchise and market position, sustained improvements in its financial performance and its prudent capital position. The ratings also take into account the 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. Revenue (premium and investment income) and profitability continued to grow in 2010 and Q111, in line with Fitch’s expectation.
In 2010, revenue increased 36% yoy to THB33bn. In Q111, revenue also rose strongly by 25% yoy to THB9.5bn. Return on average assets (ROAA) remained strong at 2.8% in 2010 (2009: 2.9%). This figure was even stronger in Q111 at 3.1% on an annualised basis. Fitch expects the revenue growth momentum to continue in 2011, given its well-diversified distribution strategy, supported by KBANK’s bancassurance network and rising bond yields. However, rising inflation and heightened competition from other investment products may slow premium revenue growth.
Its local solvency ratio as of end-March 2011 remained strong at 899% (end-June 2010: 877%) and at 285% (281%) based on EU solvency standards adopted by the Ageas Group. MTL also maintains a conservative investment mix with about 80% of invested assets being fixed income securities. Equity and foreign currency investments remain moderate and fully hedged. The maturity gap between assets and liabilities has gradually declined due to increased investment in longer-tenor fixed income securities and low-risk structured products. Meanwhile, MTL has no outstanding debt nor debt requirements in the short- to medium-term.
The National IFS rating may be upgraded by one notch if there is further improvement in its franchise and market position over the medium-term, evidenced by growing market share and improving profitability while maintaining prudent capital. Conversely, it may be downgraded if there is significant deterioration in capital with the local solvency margin falling below 480% for an extended period of time. Also steady and material erosion of market share and a weakening of profitability measures due to aggressive growth may lead to negative rating action.
Prospects for an upgrade to the IFS rating over the medium-term are remote given the wide gap in market position, capitalisation, and asset size between MTL and the top-ranking peer, American International Assurance, Thailand Branch (‘AAA(tha)’/Stable), as well as its position relative to Thailand’s local currency sovereign rating (‘A-’/Stable). Conversely, a significantly wider gap in these factors may put downward pressure on the rating.
Contact:
Primary Analyst
Narumol Charnchanavivat
Director
+662 655 4763;
Fitch Ratings (Thailand) Limited
55 Wireless Road
Lumpini, Patumwan
Bangkok 10330