A.M. Best Affirms Ratings of Kazakhinstrakh

LONDON--(BUSINESS WIRE)-- A.M. Best has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of “bbb” of Halyk-Kazakhinstrakh, Insurance Subsidiary Company of Halyk Bank of Kazakhstan, JSC (Kazakhinstrakh) (Kazakhstan). The outlook for both ratings remains stable.

The ratings of Kazakhinstrakh reflect its excellent risk-adjusted capitalisation, consistently positive operating performance and good competitive position in the Kazakh insurance market. Partly offsetting rating factors are the company’s exposure to the industry-wide issues affecting the workers’ compensation business and the increasing competitive conditions of the Kazakh market.

Kazakhinstrakh’s risk-adjusted capitalisation is expected to remain at an excellent level, supported by good internal capital generation, as demonstrated by a five-year average return on capital and surplus of 14%. Based on Kazakhstan’s national accounting standards, Kazakhinstrakh reported a net profit of KZT 3.1 billion in 2014 (2013: KZT 2.9 billion), underpinned by a combined ratio of 87.1% and solid investment earnings, continuing the trend of generating positive operating results.

An area of uncertainty relates to Kazakhinstrakh’s workers’ compensation portfolio, owing to the high frequency and severity of reported claims emanating from this line of business. This is an industry-wide problem, driven by the underdeveloped legislative framework in place to support payments for certain types of workers’ compensation claims. As a result, the company’s loss experience for this line of business has more than doubled in 2014. Despite the potential negative pressure to Kazakhinstrakh’s financial strength, A.M. Best believes that the capital buffer embedded within the company’s risk-adjusted capitalisation increases its threshold to absorb losses arising from the workers’ compensation portfolio in the medium term.

As the Kazakh market’s second largest insurer in 2014, Kazakhinstrakh maintains a good competitive position, supported by its access to wide-spread distribution channels throughout Kazakhstan. Although Kazakhinstrakh has reported material levels of growth over the past five years, the softening market conditions in the domestic market are likely to limit its expansion in the medium-term. In 2014, the company’s net written premiums grew by 7.9% to KZT 12.6 billion (approximately USD 85 million).

There are currently no upward rating pressures. However, if the company continues to successfully execute its business plans through the growth of its earnings, whilst developing risk management in line with its evolving risk profile, then positive rating actions would be considered. These fundamentals would be assessed over the longer-term period.

Negative rating actions could occur if Kazakhinstrakh’s underwriting results were to consistently decline, either due to its expansion or as a result of the adverse development of the workers’ compensation portfolio. Deterioration in risk-adjusted capitalisation to a level outside of A.M. Best’s expectation or a decline in Kazakhstan’s country risk fundamentals could also place negative pressure on the 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 Non-Insurance Ultimate Parents
• Evaluating Country Risk
• Rating Members of Insurance Groups
• Risk Management and the Rating Process for Insurance Companies
• Understanding Universal BCAR

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 Company, Inc.
Fahim Awan, +(44) 20 7397 0315
Financial Analyst
[email protected]
or
Deniese Imoukhuede, +(44) 20 7397 0277
Associate Director, Analytics
[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 Company, Inc.

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