(Repeat for additional subscribers)
April 28 (The following statement was released by the rating agency)
Fitch Ratings has upgraded Muang Thai Life Assurance Public Company Limited's (MTL)
International Insurer Financial Strength (IFS) Rating to 'A-' from 'BBB+' and its National IFS
Rating to 'AAA(tha)' from 'AA+(tha)'. The Outlook is Stable.
KEY RATING DRIVERS
The upgrade reflects the company's solid capitalisation commensurate with its
business profile, strengthened market franchise in the domestic market as well
as improved financial performance.
MTL's capitalisation has been strong by all measures. Its risk-based capital
(RBC) ratio was 460% as at end-3Q13, higher than 377% a year earlier and much
higher than the regulatory minimum of 140%. It has no leverage and does not have
any plans to use debt financing. Fitch expects capitalisation to continue to be
strong, supported by firm profitability and prudent capital management.
Profitability further improved with annualised 3Q13 pre-tax return on assets
rising to 4.6% from 4.1% in 2012, largely attributable to the company's pricing
discipline. The company's pre-tax return on assets has been consistently over 4%
MTL has consolidated its market position as the second-largest life insurer in
Thailand by total premiums and is closing the gap with the long-term market
leader. MTL's total premiums rose 23% in 2013, much faster than the 13% industry
growth, supported by its strong distribution via bancassurance and agents.
Consequently, market share increased to 13.6% from 12.5% in 2012. The company
also is the market leader in new business premiums with an 18.6% market share.
The company benefits from operational support from its major shareholders,
Kasikornbank (KBANK; Issuer Default Rating: BBB+/Stable) and Ageas Insurance
International N.V. (Ageas; IDR: A-/Stable). KBANK, Thailand's fourth-largest
bank by total assets, provides exclusive bancassurance channels while Ageas
provides technical expertise where appropriate.
MTL's investment is dominated by fixed income instruments and deposits, which
accounted for 85% of invested assets. Investments in equities are maintained at
a low proportion - approximately 10% of invested assets. Fitch expects MTL to
maintain its equity allocation at about this level as we understand the company
is not under pressure to increase risk appetite in return for higher yields.
MTL is exposed to asset/liability mismatch, similar to other Asian life
insurers, due to limited long-duration investment assets and the long-duration
liability nature of life insurers. Fitch expects that the rising proportion of
short-term insurance products and recent regulatory relaxation on investment
will support the company in gradually reducing the duration gap.
Key triggers for negative rating action on the International and National IFS
Ratings include significant weakening in capitalisation, with the RBC ratio
falling below 250% for an extended period. A significant deterioration in market
position or profitability could also be negative for ratings.
An upgrade is unlikely in the near term as MTL's International IFS rating is at
the same level as Thailand's Long-Term Local-Currency IDR (A-/Stable). MTL's
National IFS Rating is already at the highest possible level.