Fitch Affirms AIA Thailand at 'AAA(tha)'; Outlook Stable
OREANDA-NEWS. Fitch Ratings has affirmed AIA Company Limited, Thailand Branch's (AIA Thailand) National Insurer Financial Strength (IFS) Rating 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) and is based on AIACL's solid market franchise, sustained sound financial performance and strong capitalisation. AIACL is among the leading life insurers in Asia, with presence in 18 Asia-Pacific markets and more than 29 million individual policies. The company had total assets of USD168bn as at 30 November 2015.
AIACL's profitability remains strong, with a 2% pre-tax return on assets in the financial year ending 30 November 2015 (FY15). Annualised new premiums grew 14% to USD4bn, with regular premiums accounting for 88% of all annualised new premiums in FY15. This supported strong new business growth of 26% in FY15, with most markets delivering double-digit growth compared with FY14. Thailand is AIACL's second-largest market after Hong Kong, accounting for 17.2% of AIACL's operating profit after-tax and 16.7% of its total weighted premium income in FY15.
The Stable Outlook reflects Fitch's expectation that AIACL will maintain a strong credit profile in the medium- to long-term.
AIA Thailand is the market leader in the Thai life-insurance industry, with 21.9% market share in the first 11 months of 2015 by total premiums written. The company's regulatory risk-based capital of 460% as at end-September 2015 is among the highest in the industry and significantly higher than the minimum requirement of 140%. AIA Thailand has maintained its sound profitability, as evidenced in the improved value of its new business margin in FY15 to 75.8%, from 63.2% a year ago. Its annualised return on equity for 3Q15 amounted to 11.6%.
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%, debt-to-capital rising above 20% and below investment-grade bonds-to-total equity rising above 40% for an extended period. Fitch does not expect these risks to materialise in the medium-term.
AIA Thailand's National IFS Rating is already at the highest possible level and cannot be upgraded further.