Fitch Affirms Muang Thai Life at 'BBB+'; Outlook Stable

Stocks and Financial Services Press Releases Tuesday June 12, 2012 16:22
Bangkok--12 Jun--Fitch Ratings
Fitch Ratings has affirmed Muang Thai Life Assurance Company Limited's (MTL) International and National Insurer Financial Strength (IFS) ratings at 'BBB+' and 'AA+(tha)', respectively. The Outlook is Stable.

The ratings reflect sustained improvements in MTL's financial performance, its solid 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+'/Negative) and Kasikornbank (KBANK: IDR 'BBB+'/Stable), Thailand's fourth- largest bank.

For Q112, revenue increased 29% yoy to THB12bn and annualised return on average assets (ROAA) improved to 3.4% (2011: 2.8%). Fitch expects the revenue growth momentum to continue for the rest of 2012, supported by effective multi-channel distribution, KBANK's extensive bancassurance network and MTL's strong agency force. Investment yields should be supported by interest rates remaining stable for the rest of the year, after having declined on falling interest rates in Q411 and Q112. Downside risk in the short-term could come from increased volatility of equity market performance stemming from the ongoing eurozone debt crisis.

MTL's solvency position at end-March 2012 remained strong, with a capital adequacy ratio based on risk-based capital (RBC) approach of 344%. MTL also maintains a conservative investment mix with about 80% of invested assets being fixed-income securities (bonds, bills of exchange and promissory notes) at end-March 2012. Equity and foreign currency investments remain moderate and are fully hedged. The duration gap between assets and liabilities has gradually declined to single-digits, helping to mitigate liquidity risk. MTL is financially flexible as it has no outstanding debt or funding requirements in the short- to medium-term.

Prospects for an upgrade of the International and National IFS ratings over the medium-term are remote given their proximity to Thailand's Local Currency IDR ('A-'/Stable). 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 180% for an extended period. 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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