Bangkok--12 Dec--Fitch Ratings
Fitch Ratings has affirmed Muang Thai Life Assurance Public Company Limited’s (MTL) International and National Insurer Financial Strength (IFS) ratings at ‘A-’ and ‘AAA(tha)’, respectively. The Outlook is Stable.
Key Rating Drivers
The ratings reflect MTL’s sound capital buffers, sustained solid profitability, and strong market position and franchise in the domestic market.
MTL’s regulatory risk-based capital (RBC) ratio improved to 477% at end-3Q14 (460% at end-3Q13) - among the highest in the industry and above the 140% regulatory minimum. MTL has no external debt. Fitch believes MTL can withstand the upcoming strengthening in regulatory capital requirements, underpinned by its solid capital buffers and prudent capital management.
MTL is Thailand’s second-largest life insurer in total premiums written - 15.4% market share as at 3Q14 (3Q13: 14.0%). Fitch expects the company to continue consolidating its strong market position and close the gap on AIA Company Limited Thailand Branch (21.6% market share as at 3Q14) supported by the strong growth in bancassurance and MTL’s solid franchise.
The company maintained solid profitability with an annualised pre-tax return on assets at 4.2% in 1H14, unchanged from 1H13, thanks to its good pricing discipline and its fairly diversified products and distribution channels. MTL benefits from the exclusive distribution channels of Kasikornbank (IDR: BBB+/Stable), its major shareholder, and has enjoyed strong growth in the last few years. MTL’s premiums written in the first nine months of 2014 grew 26.6% yoy - of which 71.6% are distributed through bancassurance.
MTL’s investments remain conservative. The investment portfolio mainly consisted of investment grade fixed income assets (85% of invested assets) with low allocation in risky assets (10% of invested assets) at end-1H14. Fitch believes MTL will not materially shift its investment allocation into risky assets due to its prudent investment strategy and the higher risk charges for holding risky assets in the upcoming regulatory changes.
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%. 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 MTL's International IFS rating is at the same level as Thailand's Long-Term Local Currency IDR. MTL's National IFS is already at the highest possible level.