AM Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of "a-" (Excellent) to Allianz Ayudhya General Insurance Public Company Limited (AAGI) (Thailand). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect AAGI's balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. In addition, AAGI benefits from rating enhancement from Allianz SE (Allianz group).
AAGI's balance sheet strength assessment is assessed as strong, supported by its strongest level of risk-adjusted capitalisation at year end 2023, as measured by Best's Capital Adequacy Ratio (BCAR), and is expected to be at least at the very strong level over the medium term. The company benefits from strong financial flexibility with access to capital markets through its listed parent holding company, Allianz Ayudhya Capital Public Company Limited [SET: AYUD]. AM Best views the company's investment strategy as conservative, with the majority of investments allocated to cash, deposits and high-quality bonds. The company has a moderate reliance on reinsurance to support its underwriting capacity and manage exposure to catastrophic events. However, this risk is partially mitigated by the high credit quality of the reinsurance panel.
AAGI's operating performance is viewed as adequate. Following the amalgamation between AAGI and Aetna Health Insurance (Thailand) Public Company Limited (Aetna Health) on 1 March 2023, AAGI achieved a robust operating result. The improvement in underwriting performance for year-end 2023 is primarily attributed to the benefits of increased scale, cost management initiatives and a lower acquisition expense ratio, despite an elevated loss ratio emanating from the motor book of business. AAGI's stable investment income, which comprises mainly interest income, continues to support AAGI's overall profitability. Prospectively, AAGI is expected to sustain adequate operating performance, supported by its growth strategy while maintaining prudent underwriting and pricing discipline.
AM Best assesses AAGI's business profile as limited. AAGI is a non-life insurer operating in Thailand and ranks as the ninth largest general insurer, with a market share of 3.5%, based on direct premiums written in 2023. The company's underwriting portfolio is well-diversified by line of business and distribution channels. However, it has limited geographic diversification as it only offers its products in Thailand. The amalgamation with Aetna Health in 2023 provided AAGI with scale and diversification, allowing it to expand its presence in the Thai health insurance market. The company is projected to generate robust premium growth over the medium term, primarily driven by strengthening its distribution channels and focusing on the development of its health and commercial products.
The rating enhancement from Allianz SE reflects both explicit and implicit support it receives from the group. AAGI receives explicit support in the form of reinsurance from the Allianz group. In addition, the company benefits from implicit support in areas such as corporate governance and investment management services, as well as access to shared resources and services across various business functions. Although AAGI's operations account for a small portion of the group's consolidated revenue, the company is considered strategically important to the group's expansion strategy.
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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Sin Yee Chuah, CFA
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