March 6 (The following statement was released by the rating agency)
Fitch Ratings has affirmed AIA Company Limited Thailand Branch's (AIA Thailand) National Insurer Financial Strength (IFS) ratings 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 strong credit profile. AIACL is fully owned by AIA Group Limited, which is listed on the Hong Kong Stock Exchange, and it has operations in 17 markets in the Asia-Pacific. AIACL is one of the largest life insurers in the Asia-Pacific, with an extensive network of agents and employees across the region. It had assets of USD147bn as of 30 November 2013.
AIACL has a solid market franchise and distribution platform, sustained sound financial performance and business growth, and strong capital. For the financial year ended November 2013, the company reported a 16% increase in operating profit after tax with a pre-tax return on assets of 2.6%. Value of new business (VONB) increased 25% to USD1.49bn and the VONB margin remained strong at 44.1%.
The company's consolidated solvency ratio at 433% was among the highest in the industry. The 15-year exclusive bancassurance partnership with Citibank, signed in December 2013, will support its distribution activities, as will its existing agency force.
The Stable Outlook reflects Fitch's expectation that AIACL will continue to maintain its strong credit profile in the medium to long term.
Thailand is the largest profit contributor to AIACL after Hong Kong. AIA Thailand contributed 21% to AIACL's operating profit after tax. AIA Thailand is the market leader in the Thai life insurance industry with a 25% market share as of November 2013. The company recorded a regulatory risk-based capital ratio of 565% as of September 2013, the highest in the industry and well above the regulatory minimum of 140%.
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 AIACL's financial performance, that is, pre-tax return on assets falling to below 1% and debt to capital rising above 20% (7.4% at end-1H FY13). However, Fitch does not expect these events to materialise in the medium term.