Bangkok--21 Mar--Fitch Ratings
Fitch Ratings has affirmed the National Insurer Financial Strength (IFS) Rating on AIA Company Limited, Thailand Branch 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 principal regulated operating entity of AIA Group Limited (AIAGL). The group is well-positioned in the Asia-Pacific market, with a presence in 18 regional markets and total assets of USD185 billion at end-November 2016 (FY16).
AIA Thailand is a long-time life insurance market leader in Thailand, with 21.3% market share by total premiums written at end-2016, supported by its significant in-force policies, well-established agency network, comprehensive product offering and strong brand. Fitch believes the group's continued quality improvement of its agents, products and services will strengthen its business profile.
The profitability of the group and AIA Thailand has been increasing. AIAGL's value of new business (VONB) rose by 28% to USD2.8 billion at FYE16 and its operating profit after tax (OPAT) increased 15% to USD4.0 billion. AIA Thailand also showed improving profitability in line with the group, with its VONB margin rising to 82% and OPAT to USD768 million. Thailand is the third-largest market in terms of VONB contribution to the group, and as such, Fitch expects Thailand to remain its key market outside China.
Fitch expects AIAGL to retain its conservative investment strategy, with the majority of its investment portfolio allocated to quality fixed-income securities.
AIA Thailand has maintained its robust capitalisation following its strong operating performance, as evidenced by the branch's local risk-based capital ratio of 450% at end-September 2016; well above the minimum 140% regulatory level.
RATING SENSITIVITIES
AIA Thailand's National IFS Rating is already at the highest possible level and cannot be upgraded further.
Deterioration in AIAGL's credit profile could negatively affect AIA Thailand's rating. This includes an unexpected significant deterioration in financial performance; that is, pre-tax operating return on assets falling to below 1% (FYE16: 2.8%), financial leverage ratio rising above 20% (FYE16: 9%) and below investment-grade bonds/total equity rising above 40% (FYE16: 17%) for an extended period.