(The following statement was released by the rating agency)
Dec 20 -
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Summary analysis -- Tokio Marine Life Insurance Singapore Ltd. ---- 20-Dec-2012
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CREDIT RATING: Country: Singapore
Local currency A+/Negative/--
Primary SIC: Life insurance
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Credit Rating History:
Local currency Foreign currency
17-Jan-2001 A+/-- --/--
01-Apr-1999 BBBpi/-- --/--
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Rationale
The ratings on Tokio Marine Life Insurance Singapore Ltd. (TMLS) reflect the strong implicit support the company receives from its parent Tokio Marine & Nichido Fire Insurance Co. Ltd. (local currency Tokio Marine; AA-/Negative/A-1+) and TMLS' strategically important role in the wider group's Asian expansion plans. The rating also reflects our view that TMLS has a good investment profile and adequate, though volatile, operating performance. Moderating these factors are the company's weakened, but adequate, capital position relative to its risk profile and its modest competitive position in Singapore and Malaysia.
TMLS and its Malaysian subsidiary, Tokio Marine Life Insurance Malaysia Bhd., report to the group's Singapore-based regional headquarters: Tokio Marine Asia Pte. Ltd. TMLS benefits from the group's resource support for investments, planning, and information technology. While its overall profit contribution to the wider group remains small, we expect the company to receive financial support from its parent to fund its ongoing growth.
We view TMLS' investment portfolio as good, reflecting its prudent mix, with the majority of investments in bonds (55% of invested assets in 2011) and cash (8.0%). The bonds--government securities and high-rated corporate debentures--provide a good match for the company's liabilities. Although TMLS reduced its equity exposure (25.2%) in 2011, the exposure remains higher than that of the company's rated peers. Nevertheless, these assets match the participating insurance portfolio's unguaranteed bonuses.
We expect TMLS to maintain its adequate, though volatile, operating performance over the next one-two years. The company's overall operating performance in 2011 was moderate given investment-market and interest-rate volatility. TMLS' growth in 2011 was mainly driven by strong growth in Singapore. The company continues to benefit from mortality experience surpluses; however, surpluses from forfeiture/surrender have been lower than expected. TMLS' return on assets (ROA) has remained below the industry average, decreasing to 0.2% in 2011, from 1% in 2010. We attribute TMLS' low ROA to the insurer's significant participating insurance portfolio, where profits are mainly distributable to policyholders. Nevertheless, we expect the company to expand its product offerings and distribution through gradual introduction of investment-linked and non-participating products, and through increased agency recruitment.
We consider TMLS' capitalization to be adequate, despite weakening in recent years. This is partly due strong growth in the company's Singapore single-premium business. Growth in Malaysia was relatively moderate in 2011. We expect that participating business will remain the main driver of the TMLS' capital requirements.
TMLS' position within the life insurance markets in Singapore and Malaysia is small, reflecting its less developed tied agency platform and the highly competitive nature of these markets. The company distributes its products mainly through financial advisor channels in Singapore. While we consider financial advisor business to be of lower quality relative to tied agent business within the region, TMLS cautiously manages this niche channel to ensure good persistency (over 90%).
Enterprise risk management
We view TMLS' enterprise risk management (ERM) as adequate, reflecting the company's traditional approach to underwriting and managing operational risk. The company undertakes actuarial pricing and closely manages its asset-liability position. While we consider the parent's ERM to be strong, we believe the strengths of its risk framework focus on non-life insurance. We expect TMLS' ERM to evolve over time, in tandem with the parent's development. Despite being a late entrant compared with international insurers, the company has sufficient risk awareness, in our view, and monitors its overall risk profile through stress tests.
Outlook
The negative outlook on TMLS reflects the outlook on the parent. We believe TMLS will maintain its strategically important status within the Tokio Marine group, its good investment portfolio, and its adequate but volatile operating performance. We expect TMLS' capital position to remain under pressure, reflecting continued growth in its Singapore and Malaysian businesses. We could change our view of TMLS' capitalization if we obtain more visibility of the factors driving the risk of the consolidated entity. We believe that TMLS will expand moderately while gradually improving its market presence. In addition, we anticipate that the company will continue to follow prudent underwriting and investment strategies.
We could lower the rating if TMLS' capital position further weakens--undermining the company's financial profile. We could also lower the rating if TMLS' relationship with the wider Tokio Marine group wanes, which we believe is a remote possibility. We could also lower the ratings if we were to lower the ratings on the parent.
We are unlikely to revise the outlook to stable or raise the rating in the next 12-24 months unless we revise the outlook on the Tokio Marine group. This is because the rating on TMLS is kept one notch below that on the group in accordance with our criteria.
Source: http://news.yahoo.com/text-p-summary-tokio-marine-070117916.html
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