SINGAPORE–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Thaire Life Assurance Public Company Limited (Thaire Life) (Thailand). The outlook of these Credit Ratings (ratings) is negative.
The ratings reflect Thaire Life’s balance sheet strength, which AM Best categorises as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
Thaire Life’s balance sheet strength assessment is underpinned by risk-adjusted capitalisation that remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). While the company has exhibited a high dividend payout ratio over recent years, retained earnings have remained sufficient to support business growth. Other balance sheet factors include the company’s moderate risk investment portfolio, which includes holdings of higher risk asset classes such as equities and mutual funds. The company’s modest absolute capital base increases the sensitivity of risk-adjusted capitalisation, particularly to future potential increases in mortality rates given its concentration to life business. Nonetheless, AM Best does not view the current impact of the pandemic on the company’s financial condition to be significant given the limited amount of COVID-19-related claims that the company has received to date. This largely reflects the low level of COVID-19 cases and deaths experienced in Thailand thus far.
AM Best views the company’s operating performance as strong, as demonstrated by a five-year average return-on-equity ratio of 23% (2015-2019). Thaire Life has a track record of favorable earnings driven by its strong underwriting performance. Despite this, underwriting results in 2019 depict a declining trend, albeit remaining profitable, as a result of weakened loss experience from both health and life classes of business. The negative outlooks reflect AM Best’s view that an increasingly competitive operating environment in Thailand’s life and health market, the COVID-19 pandemic, as well as Thaire Life’s business growth in the less profitable health class of business, will place pressure and increase volatility on the company’s operating performance over the medium term.
AM Best assesses Thaire Life’s business profile as neutral. The company is the only domestic life reinsurer in Thailand and has long-standing relationships with key cedants that provide continued access to local life and health reinsurance business. The company continues to exhibit a concentrated cedant base, with its top five largest clients accounting for approximately 80% of gross premium written. Thaire Life’s market share fell in 2019 due to its premium growth, which is lower than that of the domestic reinsurance market. The company’s topline was affected by lower demand for credit life insurance, tightening market regulations around sales conduct of life insurance policies, portfolio remediation measures and the economic slowdown. Notwithstanding this, the company continues to be focused on growing its non-conventional reinsurance segment by developing partnerships with new cedants to offer value added services, including innovative product development and distribution.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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