AM Best has affirmed the Financial Strength Rating (IFS) of B++ (Good) and the Long-Term Issuer Credit Rating (ICR) of “bbb+” (Good) for Thaire Life Assurance Public Company Limited (Thaire Life), with a stable outlook.
However, the rating agency has also withdrawn the ratings following Thaire Life’s request to no longer participate in AM Best’s interactive rating process.
In September 2023, AM Best had downgraded Thaire Life’s ratings, citing a downturn in operating performance. However, the rating agency added that the Thai reinsurer’s balance sheet remained strong, and its operating performance was adequate.
Thaire Life is Thailand’s only life reinsurer and maintains long-standing relationships with key cedants, AM Best said. The rating agency added that it expects Thaire Life’s business growth to be boosted by “initiatives such as developing new products, cultivating strategic business relationships, and diversifying distribution channels.”
Rating drivers
AM Best considers Thaire Life’s operating performance adequate, noting a five-year average return-on-equity ratio of 8.7% from 2019 to 2023.
Underwriting margins have thinned over time due to growth in the less profitable health reinsurance sector; recent periods have negatively impacted underwriting performance due to medical inflation and higher medical insurance utilisation, which are expected to constrain performance in the near term.
Despite this, the company has generated consistent underwriting profits over the past five years, AM Best noted.
Thaire Life’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which remained at the strongest level at fiscal year-end 2023, as measured by Best’s Capital Adequacy Ratio (BCAR).
AM Best notes that the company has a moderate risk investment portfolio due to its exposure to higher-risk asset classes such as equities and mutual funds. A good level of overall portfolio diversification partially mitigates this risk.
However, the company’s high dividend payout ratio in recent years has constrained its capital and surplus growth. AM Best also points out that Thaire Life’s modest absolute capital base could increase the sensitivity of its capital adequacy to shock events and changes in future performance.
Despite these challenges, Thaire Life is expected to continue growing and diversifying its business portfolio while implementing remedial actions to improve profitability.
Investment income, including interest and dividend income, is also expected to support overall earnings, AM Best said.
