A.M. Best Affirms Ratings of Eurasia Insurance Company JSC

LONDON--(BUSINESS WIRE)-- A.M. Best has affirmed the financial strength rating of B++ and the issuer credit rating of “bbb+” of Eurasia Insurance Company JSC (Eurasia) (Kazakhstan). The outlook for both ratings is stable. Eurasia is the majority-owned subsidiary of Eurasian Financial Company JSC (Eurasian Financial), a financial services group also based in Kazakhstan.

The ratings of Eurasia reflect its excellent risk-adjusted capitalisation; solid, albeit volatile, underwriting performance; and strong business profile as a leading insurance and reinsurance provider in the Kazakh market. A partially offsetting factor is Eurasia’s developing international strategy, due to the challenging market conditions in its target markets.

Eurasia's excellent risk-adjusted capitalisation is supported by its large capital base. Growth of Eurasia's capital and surplus reflects its good earnings generation and shareholders' strategy of reinvesting a large portion of profits to sustain the company's financial strength.

Eurasia’s operating performance remains strong, as demonstrated by a five-year average return on net earned premiums of 46.1%, underpinned by an average combined ratio of 82.4% over the same period. However, the company’s technical results remain volatile and have been trending above the five-year average in more recent years, owing to the high frequency of large single risk losses mainly arising from its international portfolio. A.M. Best believes that Eurasia’s technical results are likely to remain subject to volatility as the company continues to expand internationally, due to the intense competitive conditions and tightening technical margins within these markets.

Eurasia is the leading (re)insurer in Kazakhstan, with a 16.1% share of the market in 2014, by net premium volume. The company’s inwards reinsurance portfolio is largely focused on global short-tailed risks and remains the main driver for expansion. In A.M. Best’s opinion, Eurasia’s limited competitive standing outside of its domestic market and the strong competition from reinsurers with better market profiles are factors that will likely continue to constrain the quality of risks offered to Eurasia. The company’s underwriting performance metrics have diminished as the company has increased its international presence.

Eurasia's ultimate parent, Eurasian Financial, remains significantly exposed to the local Kazakh banking sector through its subsidiary, Eurasian Bank, which is considered to have vulnerable credit quality. The impact of the credit profile of the banking affiliate on Eurasia's financial strength is somewhat mitigated by domestic regulatory restrictions on the removal of capital from an insurance subsidiary.

Positive rating actions would depend on the increased stability of Eurasia’s underwriting performance and demonstrable improvements in its competitive position outside of the Kazakh market.

Key factors that could trigger negative rating actions include a sustained decline in the company’s operating performance, particularly as a result of its international expansion, a deterioration of risk-adjusted capitalisation to a level outside of A.M. Best’s expectations or a decline in Kazakhstan’s country risk fundamentals.

An improvement or decline in the credit profile of Eurasia’s banking affiliate, Eurasian Bank, could also have a positive or negative impact on Eurasia’s ratings.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilised:

• Catastrophe Analysis in A.M. Best Ratings

• Evaluating Country Risk

• Rating Members of Insurance Groups

• Risk Management and the Rating Process for Insurance Companies

• Understanding Universal BCAR

• Evaluating Non-Insurance Ultimate Parents

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

A.M. Best
Deniese Imoukhuede, +(44) 20 7397 6264
Associate Director
[email protected]
or
Carlos Wong-Fupuy, +(44) 20 7397 0287
Senior Director
[email protected]
or
Christopher Sharkey, +(1) 908-439-2200, ext. 5159
Manager, Public Relations
[email protected]
or
Jim Peavy, +(1) 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best

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