Bangkok--26 Aug--Fitch Ratings
Fitch Ratings has assigned Thai Life Insurance Public Company Limited (TLI) International and National Insurer Financial Strength (IFS) ratings of ‘A-’ and ‘AAA(tha)’, respectively. The Outlook is Stable.
Key Rating Drivers
The International IFS and National IFS ratings reflect TLI’s sound financial performance, solid market franchise, and conservative investment portfolio. The company also has strong capitalisation to support growth and act as a buffer against downside risks.
TLI’s focus on high margin products is reflected in the company’s sound profitability with an average pre-tax return on assets of 2.5% during 2009-2013. TLI recorded pre-tax return on assets at 2.2% in 2013 (2.6% in 2012).
TLI is the third-largest life insurer in Thailand by total premiums written with 12.4% market share in 2013. The company has been operating for more than 70 years and has 311 branches countrywide as at end-2013. TLI has almost 65,000 tied agents countrywide, the second-largest agency network in the country, of which nearly 30,000 are active agents.
Fixed-income securities, cash and deposits made up about 87% of TLI’s invested assets at end-2013. The company allocated less than 5% of its invested assets to equities. Fitch believes TLI’s investment portfolio will remain conservative, dominated by good-quality fixed-income securities.
TLI’s strong capitalisation is supported by consistent healthy profitability and high retained earnings. TLI’s risk-based capital (RBC) ratio was at 478% at end-March 2014, materially higher than the 360% a year earlier and well above the minimum regulatory requirement of 140%.
Fitch expects a partnership with Meiji Yasuda Life Insurance Company (Meiji Yasuda Life; IFS: A+/Negative) to benefit TLI in terms of risk management and sales and product capabilities. Meiji Yasuda Life acquired 15% of TLI in 2013 to increase its presence outside of Japan. The agency believes TLI has no plan to further alter its ownership structure in the medium term.
Rating Sensitivities
Key rating triggers for a downgrade include a material decline in its capital buffer that can be seen in its risk-based-capital ratio dropping below 250% for an extended period, and a sustained weakening in profitability that is reflected in pre-tax return on assets sustained below 1%, especially as a result of the company shifting focus to lower margin products. If Thailand’s Long-Term Local Currency Issuer Default Rating (IDR) of ‘A-’ with Stable Outlook is downgraded, the IFS rating on the insurer is also likely to be lowered.
An upgrade is unlikely in the near term as TLI’s International IFS rating is at the same level as Thailand’s Long-Term Local Currency IDR. TLI’s National IFS is already at the highest possible level.
Contact:
Trin Siriwutiset (National rating)
Associate Director
+662 108 0154
Fitch Ratings (Thailand) Limited
57 Wireless Road
Lumpini, Patumwan
Bangkok 10330