Bangkok--10 Oct--Fitch Ratings
Fitch Ratings has affirmed AIA Company Limited Thailand Branch’s (AIA Thailand) National Insurer Financial Strength (IFS) ratings at ‘AAA(tha)’. The Outlook is Stable.
Key Rating Drivers
The rating reflects AIA Thailand’s legal status as a branch of AIA Company Limited (AIACL). The rating is based on AIACL’s solid market franchise, sustained sound financial performance and strong capitalisation. AIACL is a leading life insurer in Asia, with more than 28 million in-force policies, a 250,000-strong agency force and an established presence in 17 markets in Asia.
AIACL’s profitability remained strong, with its pre-tax return on assets of 2.8% for 1H14 on an annualised basis (FY13: 2.5%). Its value of new business margin for 1H14 was 46.2% (1H13: 41.6%). The company’s consolidated solvency ratio improved further to 448% at end-May 2014, from 433% at end-November 2013, and was among the highest in the industry.
The Stable Outlook reflects Fitch’s expectation that AIACL will continue to maintain a strong credit profile in the medium to long term.
Thailand is AIACL’s second-largest market, after Hong Kong, contributing 19% to AIACL’s total weighted premium income in 2013. AIA Thailand is the market leader in the Thai life insurance industry with a 21.2% market share in January-July 2014 (2013: 25%). The company‘s regulatory risk-based capital of 524% as of June 2014 is the highest in the industry and significantly higher than the minimum requirement of 140%.
RATING SENSITIVITIES
A material deterioration in AIACL’s credit profile could have a negative impact on AIA Thailand’s rating. This could include an unexpected significant deterioration in financial performance, that is, pre-tax return on assets falling to below 1% and debt to capital rising above 20%. However, Fitch does not expect these risks to materialise in the medium term.