February 27, 2017 / 7:06 AM / 9 months ago

Fitch Affirms FWD Life Indonesia at IFS 'A(idn)'; Outlook Stable

(The following statement was released by the rating agency) JAKARTA, February 27 (Fitch) Fitch Ratings Indonesia has affirmed PT FWD Life Indonesia's National Insurer Financial Strength (IFS) Rating at 'A(idn)'. The Outlook is Stable. 'A' National IFS Ratings denote a strong capacity to meet policyholder obligations relative to all other obligations or issuers in the same country, across all industries and obligation types. However, changes in circumstances or economic conditions may affect the capacity for payment of policyholder obligations to a greater degree than for financial commitments denoted by a higher rated category. KEY RATING DRIVERS The affirmation reflects FWD Group's commitment to provide capital and operational support to FWD Life Indonesia, which Fitch views as credit positive. However, the rating is constrained by the company's short operating record, associated business execution risks and small market position in Indonesia's competitive life insurance market. FWD Life Indonesia is 60.9% owned by FWD Group, which has insurance businesses across Asia. FWD Life Indonesia continues to draw on its parent's marketing and operational resources, including risk management and information technology. Fitch believes the synergies and sharing of technical know-how with the parent could help the life insurer build its business franchise. Fitch expects FWD Life Indonesia's capitalisation to remain stable as it expands, underpinned by ongoing capital injections from its parent. The company's capitalisation, measured by regulatory risk-based capital, was 486% at end-2016, well above the 120% regulatory minimum. FWD Life Indonesia reported a net operating loss in 2016 due to higher costs from brand building, network expansion and other operating expenses. The company plans to focus on sales of regular-premium unit-linked policies and protection-based products in the employee benefit segment to improve profitability. It will support this by continuing to expand its tied agency, bancassurance and e-commerce channels. Failure to execute its business plans appropriately and successfully could hurt the company's financial stability. FWD Life Indonesia obtained its insurance licence in February 2013 and started writing business in 2014, capturing about IDR231bn of new business premiums by end-2016. Its market share, measured by life gross premiums, was less than 1% at end-2016 and it has a smaller absolute market size in terms of total assets and equity compared with peers. The Stable Outlook reflects Fitch's expectation that FWD Life Indonesia will maintain its healthy financial fundamentals and sound capital buffer relative to its operating profile. RATING SENSITIVITIES Key rating triggers for a downgrade include a perceived weakening of support from FWD Group; weaker-than-Fitch-expected business growth or market franchise; poor operating performance over a prolonged period; or a significant deterioration in capitalisation, with the regulatory capital ratio persistently below 200%. Key rating triggers for an upgrade include a significant and sustained improvement in the company's standalone profile over the next three to five years in terms of market franchise, business growth and profitability, with ROE consistently above 5%. Contact: Primary Analyst Jessica Pratiwi Analyst +62 21 2988 6816 PT Fitch Ratings Indonesia DBS Bank Tower 24th Floor Suite 2403 JI. Prof. Dr. Satrio Kav 3-5 Jakarta, Indonesia 12940 Committee Chairperson Jeffrey Liew Senior Director +852 2263 9939 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. 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