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
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