Bangkok--22 Mar--Fitch Affirms
Fitch Ratings has affirmed Muang Thai Life Assurance Public Company Limited’s (MTL) International and National Insurer Financial Strength (IFS) ratings at ‘BBB+’ and ‘AA+(tha)’, respectively. The Outlook is Stable.
Key Rating Drivers
The affirmation reflects MTL’s strengthened market position, strong and stable profitability and solid capitalisation. The ratings also reflect support from its major shareholders, Ageas Insurance International N.V. (Ageas; IDR BBB+/Stable) and Kasikornbank (KBANK: IDR BBB+/Stable), Thailand’s fourth-largest bank. Ageas provides operational and technical support, while KBANK provides MTL with a strong bancassurance channel.
MTL is the third-largest life insurer in Thailand by assets. Its market share in gross written premium has consistently increased, driven by its strong bancassurance and agent channel. MTL became the second largest life insurer by gross written premium in 2012 when its market share reached 12.5%, up from 11.5% in 2011.
MTL’s profitability is driven by strong premium growth, stable investment yield, cost discipline and favourable mortality experiences. Net profit in 9M12 increased 63% yoy, mainly due to premium growth and a lower corporate tax rate. MTL’s premium growth benefited from strong industry growth and market share gain. For 2012, MTL’s premium increased 29%, outpacing the sector average of 19% which was also its fastest for 10 years. Fitch takes comfort that such rapid growth is a result of MTL’s competitiveness and a low insurance penetration in Thailand. Fitch expects the positive momentum in profitability to continue in 2013.
MTL’s investment policy remains conservative, with fixed income and deposits accounting for 85% of total invested assets and equity allocation at 8%-11% over the past four years. The insurer’s strategy has been to increase allocation to investment-grade corporate bonds to enhance yield. The credit quality of its corporate fixed income assets has, on average, been strong. MTL has narrowed its asset/liability duration gap with more long-term bonds and a change to product mix.
MTL’s capitalisation has been strong by all measures. Its capital ratio based on the risk-based capital (RBC) was 377% as of Q312, versus a regulatory requirement at 140%. It has no leverage and does not have any plans to use debt financing. Fitch expects capitalisation would continue to be strong, supported by firm profitability and prudent capital management.
Rating Sensitivities
Key triggers for positive rating action for International and National IFS include further sustainable improvements in its market franchise which narrow the gap with its major peer, American International Assurance Company Limited (AAA(tha)/Stable) while maintaining strong capitalisation and stable profitability.
Key triggers for negative rating action for International and National IFS include material weakening in capitalisation with RBC falling below 180% for an extended period. A significant deterioration in market position or profitability could also be negative for ratings.