Bangkok--29 Jun--Fitch Ratings
Fitch Ratings has today assigned American International Assurance Company Limited - Thailand (AIA Thailand) a National Insurer Financial Strength (IFS) rating of ‘AAA(tha)’ with a Stable Outlook. The rating reflects AIA Thailand’s strong business position in Thailand, prudent capitalisation compared to local peers, strong agency force and financial performance. The rating also takes into consideration the technical and operational support provided by its head office, American International Assurance Company Limited (Hong Kong) (AIAHK) and AIAHK’s immediate parent, AIA Group Ltd, headquartered in Hong Kong.
AIA Thailand ranks as the number one life insurer in the Thai market with over 30% market share. While AIA Thailand’s dominant position is being challenged by top bancassurance players, it still holds a big lead over other players due to the fact that agency force remains to be the main channel of distribution in Thailand, despite strong growth in the bancassurance market. Furthermore, its strong agency force is expected to continue to underpin its dominance in the life sector. The Stable Outlook reflects Fitch’s expectation that all of AIA Thailand’s strengths will be maintained. At the same time, Fitch expects AIA Thailand will continue to receive operational support as well as financial support from AIAHK, if needed, given its position as a branch and core entity within its group.
AIA Thailand’s Thai GAAP net income declined in 2009 with Fitch-calculated return on assets (ROA) in FY09 at 0.7%, down from 1.8% in FY08, mainly due to realised losses incurred from the restructuring of its equity portfolio. In tandem, the restructuring also resulted in a THB16.6bn gain in fair value reserve in FY2009. Profitability is expected to improve in FY2010 with limited impact from the political turmoil in Q210, given the branch’s solid market position, good investment track record, innovative products and strong agency force.
Like other Asian and Thai life insurers, AIA Thailand faces asset-liability mismatch given the scarcity of long-dated bonds, which leads to a wide maturity gap between assets and liabilities. However, this has gradually improved given its active management of both assets and liabilities. AIA Thailand’s investment strategy remains conservative with fixed income securities accounting for about 80% of total invested assets and only 10% is invested in equity.
AIA Thailand has the strongest capital position among Thai life insurers, with solvency ratio reaching 1,187% of the local minimum requirement at end-2009 and compared to an industry average of about 700%. The strong capital was due to capital accretion from robust profits over the years and the restriction on profit remittance out of Thailand as imposed by Thailand’s Office of Insurance Commission (OIC). AIA Thailand’s solvency should remain adequate under the proposed Risk-Based Capital framework expected to be implemented in 2011.
AIA Thailand operates in Thailand as a branch and core operating unit of American International Assurance Company Limited (Hong Kong). To date, AIA Thailand remains the only foreign branch in Thailand. The branch is the third largest by assets among AIA’s Asian units in 15 markets and is a major contributor to the group’s premium income and net profit. AIA Thailand distributes its products through its largest agency force countrywide of about 81,000 agents and agent leaders as at end-2009.
Applicable criteria available on Fitch’s website at www.fitchratings.com: “Insurance Rating Methodology” dated December 29, 2009; “Life Insurance Rating Methodology” dated 24 March 2010; “Fitch’s Approach to Rating Insurance Groups” dated 24 March 2010, and “Insurance Industry: Global Notching Methodology and Recovery Analysis” dated 29 December 2009.
Contacts: Narumol Charnchanavivat, Bangkok, +662 655 4763; Wan Siew Wai, Singapore, +65 6796 7217
Note to Editors: National IFS Ratings are assigned to an insurer’s policyholder obligations, and are an assessment of relative financial strength. National IFS Ratings assess the ability of an insurer to meet policyholder and related obligations, relative to the best credit risk in a given country across all industries and obligation types. National IFS ratings are designed to serve the needs of local insurance markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National IFS ratings in Thailand. Comparisons between different countries’ National IFS rating scales, or between an individual country’s National IFS rating scale and the International IFS rating scale, are inappropriate.
Additional information is available at www.fitchratings.com.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.