Bangkok--9 Sep--Fitch Ratings
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 ratings reflect MTL’s strengthened market franchise, and its strong profitability and capitalisation. The ratings also reflect support from its major shareholders, Ageas Insurance International N.V. (Ageas; IDR A-/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 to distribute the latter’s products.
The Stable Outlook reflects Fitch’s view that profitability would continue to be strong based on premium growth and cost discipline, while maintaining prudent capitalisation.
MTL continued to deliver strong financial performance in 2012 and H113, driven by high premium growth and stable expenses relative to premiums. Gross written premiums in 2012 increased 29% to THB49bn, while net profit increased 41% due to premium growth and a lower corporate tax rate from the government’s measures. Net profit in H113 increased 43% yoy, driven by gross written premium growth of 26% yoy and a further reduced corporate tax rate for 2013. Pre-tax return on assets increased to 4.7% in H113 (2012: 4.1%).
MTL’s strong premium growth was a result of healthy industry prospects and market share gains, particularly in bancassurance. Total life insurance premium in Thailand increased 16.7% yoy in H113, despite slower economic growth, due to increasing awareness of insurance products and low penetration in Thailand.
MTL’s market share in total premiums further increased in H113 to 14% (2012: 12.5%), maintaining its position as the second-largest insurer in terms of premium shares after AIA Company Limited, Thailand Branch’s (IFS: AAA(tha)/Stable) 24.1%. However, its market share in new business increased to 18.5% in H113 (2012: 16.6%), the largest for the first time. This was due to MTL being the largest player in bancassurance in Thailand, after its market share in increased to 24.4% in H113 from 22.3% in 2012.
MTL’s investment risk remains low, as fixed-income assets and deposits remain the largest asset class at 83% of total invested assets, with the majority in Thai government and state enterprise bonds. Equity allocation slightly increased to 10% as of end-Q213 from 8.9% as of end-Q312, still within the past four years’ range of 8%-11%. Capitalisation was solid, with regulatory risk-based capital (RBC) of 429% as of end-Q213 (Q312: 377%), far exceeding the regulatory requirement of 140%. It has no debt, nor any debt financing plans. Fitch expects capitalisation to remain strong, supported by expected strong profitability and prudent capital management.
RATING SENSITIVITIES
Key triggers for positive rating action include further sustainable improvements in its market franchise narrowing the gap with its major peer, AIA Company Limited, Thailand Branch while maintaining strong capitalisation and stable profitability.
Key triggers for negative rating action include material weakening in capitalisation with RBC falling below 180% for an extended period, or a significant deterioration in market position or profitability.