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TEXT-S&P summary: Dhipaya Insurance Public Co. Ltd.

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(The following statement was released by the rating agency)

Oct 11 - =============================================================================== Summary analysis -- Dhipaya Insurance Public Co. Ltd. ----------- 11-Oct-2012 =============================================================================== CREDIT RATING: Country: Thailand Local currency BBB/Negative/-- Primary SIC: Fire, Marine, and Casualty Insurance =============================================================================== Credit Rating History: Local currency Foreign currency 24-Sep-2012 BBB/-- --/-- 16-May-2012 BBB+/-- --/-- 30-Dec-2009 A-/-- --/-- =============================================================================== Rationale

The ratings on Dhipaya Insurance Public Co. Ltd. reflect the insurer's good competitiveposition in Thailand's non-life insurance industry. The insurer's diversified and liquidinvestment portfolio and its financial flexibility also support the ratings. Dhipaya's weakenedcapital position due to losses from last year's floods in Thailand and the insurer's rapidgrowth strategy temper these strengths. Dhipaya's reliance on reinsurance subjects it toincreased counterparty credit risks on reinsurance recoverable assets.

We expect Dhipaya's business growth to remain strong in 2012 despite losses related to theThailand floods in 2011. This is because of good support from shareholders for new businessopportunities and the company's continued efforts to expand and develop its sales channels. Theinsurer has leveraged its historical ties with state enterprises to source a sizable proportionof its business. Dhipaya's increased focus on retail clients through its agents and businesspartners has led to a strong growth in business from motor, personal accident, and healthinsurance. Dhipaya ranks second among domestic property and casualty insurers, with a marketshare in terms of gross premiums written of 10.2% as of April 30, 2012.

Dhipaya has risk exposure to engineering and large projects, which are highly reinsured. Weanticipate that premiums in some businesses, particularly in commercial lines, will increase andsupport the insurer's business profile.

We expect flood-related losses to weaken Dhipaya's underwriting performance in 2012.Nevertheless, we anticipate that the insurer will remain profitable because of the contributionfrom its investments.

Dhipaya's operating performance has historically been stable, but deteriorated in 2011 dueto the floods. Its combined ratio weakened to 109.9% for 2011 from 90.1% a year earlier.Underwriting continued to suffer in the first half of 2012 with the combined ratio at 115.3%. Wedo not anticipate any further significant increase in flood-related losses because we believethat the company has identified and reserved for most of the losses. However, ultimate lossescould still vary from our expectations.

Dhipaya's expense ratio has been declining due to the insurer's increased business volume.Tariffs have historically aided underwriting stability; however a portion of Dhipaya's businessis not subject to tariffs. The insurer's increase in retail business and heavy use ofreinsurance somewhat buffers the operating performance against volatility.

Dhipaya has a diversified investment portfolio compared to other insurers in Thailand, withcomparatively lower concentrations in equities or unit trusts. Dhipaya has only 9.5% invested inequities and 5.2% in property. The remainder of its investments is in government securities(54%), debentures and notes (17%), and cash (15%). In light of the large volume of claims thatwill be processed in 2012 and 2013, the company's holdings of high quality short duration assetslimit the need to liquidate assets at discounted rates. The company's investment income improvedto 4.8% in 2011 (2.7% in 2010) with gains from securities trading.

We consider Dhipaya's financial flexibility to be supportive of the rating due to its listedstatus and high profile state-linked shareholders.

The 2011 floods in Thailand weakened Dhipaya's capitalization and the insurer's rapid growthcontinues to drag its risk-based capital position. In our view, the company's capital buffer forthe current rating category is thin and any shock on earnings or capital due to factors such asreinsurance asset write-downs, reserves strengthening, etc. could exert further pressure on itscapitalization.

Enterprise risk management

We consider Dhipaya's enterprise risk management as adequate despite the flood losses from2011. We consider the company's risk exposure to be simple. Dhipaya has in place processes tomonitor and control most areas of risks. Our assessment reflects the insurer's still-developingframework, particularly in strategic risk management. The company's catastrophe risk control aswell as its use of risk models could be further developed.

Dhipaya has set up a risk management committee and other committees to report on and monitorall aspects of its operations.

Similar to other Thai companies, we consider Dhipaya's catastrophe risk control asunsophisticated, reflecting the occurrence of flood losses for the company. Dhipaya's othermajor risk is credit risk due to the high cession ratios of high value property and projectbusinesses. Its reinsurance placement guidelines--that require reinsurers to have good creditquality--mitigate these risks, in our view.

Outlook

The negative outlook reflects our view that Dhipaya's credit profile could further weakenover the next 12-24 months due to the uncertainty surrounding the extent of flood-relatedlosses. In addition, losses from market agreements (sharing of business with other insurers) andfrom business interruption claims could further develop and negatively affect the company.

We could lower the ratings if Dhipaya's capitalization weakens from the current reportedlevel because of a lower-than-expected improvement over the next 12-24 months, or ifrisk-adjusted capital, as measured by our capital model, weakens.

We may revise the outlook to stable if Dhipaya can improve and maintain its capitalizationat levels that are commensurate with a 'BBB' rating.

Related Criteria And Research

-- Refined Methodology And Assumptions For Analyzing Insurer Capital Adequacy Using TheRisk-Based Insurance Capital Model, June 7, 2010

-- Interactive Ratings Methodology, April 22, 2009

((Bangalore Ratings Team, Hotline: +91 80 4135 5898swati.ray@thomsonreuters.com,Group id:BangaloreRatings@thomsonreuters.com,Reuters Messaging:swati.ray.thomsonreuters.com@reuters.net))