TEXT-Fitch affirms Ageas Insurance Company (Asia) at IFS 'A-'

Thu Jan 5, 2012 3:21am EST

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(The following statement was released by the rating agency)

Jan 05 - Fitch Ratings has affirmed Ageas Insurance Company (Asia) Limited's (AICA) Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BBB+', and Insurer Financial Strength Rating at 'A-'. The Outlook is Stable. The senior unsecured debt issued through Ageas Capital (Asia) Ltd has also been affirmed at 'BBB+'.

The ratings take into account AICA's initiatives in further strengthening its capitalization and satisfactory operating performance. While AICA's statutory capital position has been negatively impacted by a downward shift in long-term interest rates, capital contributions of USD130m by its parent in Q411 has mitigated the solvency pressure. Following these capital injections, AICA's capitalization on a risk-adjusted basis as measured by Fitch is consistent with the current ratings.

AICA's new business generation during H111 was supported by an increased number of independent financial advisors, a stable agency force and productivity gains. Fitch expects that favourable mortality experience and steady business growth in non-linked regular premium products will continue to contribute to the company's operating profitability in the coming year.

Fitch notes AICA's asset/liability mismatch is likely to continue to result in solvency volatility for the insurer. Fitch expects AICA to maintain adequate capital buffer to absorb any unforeseeable shocks from adverse market volatility.

Deterioration in the local solvency margin below 220% on a sustained basis may result in a negative rating action. Conversely, Fitch may consider positive rating action if there are further improvements in the company's business franchise and distribution capability in the domestic life insurance market.

In view of the growing importance of AICA to the group in Asia, its ratings may benefit if Fitch's view of its strategic status and position within Ageas Group improves. Additionally, given AICA's existing capital position, a singe-notch downgrade in its parent's ratings is unlikely to exert pressure on AICA's ratings. However, if the parent's ratings were to be downgraded by more than one notch, AICA's ratings are likely to come under pressure.

AICA is the sole insurance subsidiary fully owned by Ageas SA/NV (IDR 'BBB+'/Stable) and Ageas NV (IDR 'BBB+'/Stable) in Asia. AICA offers a wide array of long-term individual life insurance products in Hong Kong.

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