Bangkok--4 Jul--Fitch Ratings
Fitch Ratings (Thailand) has affirmed American International Assurance Company Limited, Thailand Branch’s (AIA Thailand) National Insurer Financial Strength (IFS) Rating at ‘AAA(tha)’ with a Stable Outlook.
The rating reflects AIA Thailand’s legal status as a branch of American International Assurance Company, Limited (AIA), which is profitable, soundly capitalised, geographically well-diversified and has strong market positions in several Asian countries.
AIA Thailand’s National IFS Rating is underpinned by its strong franchise as the top life insurer in Thailand, strong capitalisation, and a prudent liquidity and risk management system aligned with that of AIA. Fitch expects AIA Thailand to maintain its leading market share in life premium, supported by its well established agency force. AIA Thailand remains well ahead of its domestic peers, despite its declining market share as a result of competition from other major life insurers with strong bancassurance distribution capabilities.
Fitch expects AIA Thailand’s capital to remain exceptionally strong, notwithstanding profit remittances to AIA made over the last two to three years. This has been supported by the branch’s sound financial performance and ongoing capital accumulation. Its regulatory solvency ratio based on a risk-based capital approach remains the highest in the Thai insurance industry at 603% at end-December 2011.
AIA Thailand has seen improved profitability, which Fitch expects to be sustainable. The branch’s margin and net profit have been strengthened through an enhanced product mix and efficient cost management. Investment performance should remain strong with running yields maintained above benchmark, supported by prudent risk management under AIA’s guidelines. Downside risk, however, could come from domestic stock market volatility that could lead to returns falling below current targets.
A substantial weakening of AIA’s credit profile may trigger a downgrade of the rating of AIA Thailand. This would include an unexpected significant deterioration in financial performance, i.e. pre-tax return on assets of below 1%, liquid assets to policyholder liabilities dropping below 60% and the regulatory capital ratio falling below 180% for an extended period. However, Fitch views these as remote prospects over the short- to medium-term. AIA Thailand’s National IFS Rating is at the highest level possible, and so cannot be upgraded further.