KEY RATING DRIVERS
The ratings reflect TLI's sound financial performance, prudent investment approach and solid domestic market franchise. The ratings also take into consideration a strong capital position.
TLI is the third-largest life insurer in Thailand by total premiums, with a 12.5% market share in the first 11 months of 2015. This strong market position is supported by a long-established franchise and extensive agency network nationwide. The company's main distribution channel is agents, which accounted for 82.4% of its premium written in the first nine months of 2015. TLI has the second-largest market share (21.0%) in premiums written through agents.
TLI's financial performance remains solid, supported by its prudent pricing, strong distribution platform and acceptable investment return. The company's three years (2012-2014) average pre-tax return on assets was 2.4% (annualised 3Q15: 2.7%), which compares well with its local and international peers.
TLI's asset allocation for its investments is mainly unchanged and remains conservative. Fixed-income securities, cash and deposits represented about 85% of invested assets at end-3Q15. Furthermore, allocation to equities remains well below 10% of TLI's total invested assets.
TLI's Prism Factor-Based Capital Model (Prism FBM) score was 'Extremely Strong' based on its 3Q15 financials. Fitch expects TLI's full-year 2015 results will place it in the 'Extremely Strong' range. TLI's Prism FBM results are supported in particular by a high level of equity capital. The company's capital ratio based on risk-based capital (RBC) was 374% at end-3Q15, much higher than the regulatory minimum of 140%.
TLI has a strategic partnership with Meiji Yasuda Life Insurance Company (MYL; IFS: A/Stable), which includes MYL owning 15% of TLI. TLI has benefitted from MYL's support in risk management, sales and product capabilities through the interaction between the two companies.
RATING SENSITIVITIES
Key rating triggers for a downgrade would include a major decline in its capital buffer that would be seen in its RBC ratio dropping below 250% for an extended period, and a sustained weakening in profitability that is reflected in pre-tax return on assets remaining below 1%.
TLI's IFS rating is likely to be lowered if Thailand's Long-Term Local-Currency Issuer Default Rating (IDR) of 'A-'/Stable were downgraded.
An upgrade is unlikely in the near term as TLI's International IFS rating is at the same level as Thailand's Long-Term Local-Currency IDR. TLI's National IFS is already at the highest possible level.