SINGAPORE--(BUSINESS WIRE)--AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” of Thaire Life Assurance Public Company Limited (Thaire Life) (Thailand).
These Credit Ratings (ratings) reflect Thaire Life’s balance sheet strength, which AM Best categorizes as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The negative outlooks reflect AM Best’s view that an increasingly challenging operating environment in Thailand’s life and health market, as well as Thaire Life’s recent growth in the less profitable health class of business, will place pressure and increase volatility on underwriting performance over the medium term.
Thaire Life’s balance sheet strength assessment is underpinned by risk-adjusted capitalization 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 also is viewed to have a modest absolute capital base, which increases the sensitivity of risk-adjusted capitalization to volatility in the event of fair value movements of investments, as well as to changes in future performance and higher-than-expected dividend payments.
AM Best views the company’s operating performance as strong, as evidenced by a five-year average return on equity ratio of 26% (2014-2018). Thaire Life has a track record of favorable earnings driven by the strong underwriting performance of its in-force life business. Despite this, underwriting results in 2018 depicted a declining trend, albeit remaining profitable, as a result of weakened loss experience from health and life classes of business. Going forward, AM Best expects that an increasingly competitive operating environment, as well as Thaire Life’s portfolio mix becoming increasingly weighted toward thinner margin and more volatile health business, will likely drive a downward trend in underwriting 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, with long-standing relationships with key cedants providing continued access to local life and health reinsurance business. In 2018, the company reported gross written premiums (GWP) of THB 2.4 billion (USD 74 million), equating to a market share of approximately 20%. The company continues to exhibit a concentrated cedant base, with the top five largest clients accounting for circa three quarters of GWP. In addition, AM Best expects a recent tightening of regulation aimed at improving market conduct surrounding life insurance sales practices to slow domestic life insurance premium growth over the medium term.
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