Fitch Upgrades Muang Thai Life to ‘AA+(tha)’; Outlook Stable

Stocks and Financial Services Press Releases Thursday December 15, 2011 08:19
Bangkok--15 Dec--Fitch Ratings

Fitch Ratings has upgraded Muang Thai Life Assurance Company Limited’s (MTL) National Insurer Financial Strength (IFS) Rating to ‘AA+(tha)’ from ‘AA(tha)’. The Outlook is Stable. At the same time, the International Insurer Financial Strength (IFS) Rating has been affirmed at ‘BBB+’ with Stable Outlook.

The upgrade reflects MTL’s sustained improvements in financial performance, its strong franchise and market position, and prudent capitalisation. The ratings also take into account continuous operational support provided by MTL’s shareholders, Ageas Insurance International N.V. (Ageas; IDR ‘BBB+’/Stable) and Kasikornbank (KBANK: IDR ‘BBB+’/Stable), Thailand’s fourth- largest bank.

For 9M11, revenue increased 32% yoy to THB32bn and the return on average assets (ROAA) remained stable at an annualised rate of 2.5% (2010: 2.6%). Fitch expects the revenue growth momentum to continue in 2012, supported by effective multi-channel distribution, KBANK’s extensive bancassurance network and its strong agency force. However, investment yields could decline due to increased capital market volatility. For Q411, Thailand’s severe floods are likely to have resulted in business disruption and increased flood-related costs although the impact should be negligible and temporary.

MTL’s solvency position at end-June 2011 remained strong by all measures: amounting to 849% in the domestic solvency margin; 269% by EU standards; and 308% based on Thailand’s risk-based capital framework. MTL also maintains a conservative investment mix with about 80% of invested assets (including cash, loans and property) being fixed-income securities (bonds, bills of exchange and promissory notes) at end-June 2011. Equity and foreign currency investments remain moderate and fully hedged. The duration gap between assets and liabilities has gradually declined to single-digits. MTL is financially flexible as it has no outstanding debt and no funding requirements in the short- to medium-term.

Prospects for an upgrade of the International IFS rating over the medium-term are remote given its position relative to Thailand’s Local Currency sovereign rating (‘A-’/Stable). The National IFS rating is therefore unlikely to be upgraded further. Conversely, the International IFS rating and the National IFS rating could be downgraded if there is significant deterioration in capital with the local solvency margin falling below 500% for an extended period of time. In addition, steady and material erosion of franchise strength and a weakening of profitability measures due to aggressive growth may lead to negative rating action.

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