A.M. Best Affirms Ratings of Kommesk-Omir Insurance Company JSC

LONDON--(BUSINESS WIRE)-- A.M. Best has affirmed the financial strength rating of C++ (Marginal) and the issuer credit rating of “b+” of Kommesk-Omir Insurance Company JSC (Kommesk) (Kazakhstan). The outlook for both ratings is stable.

The ratings reflect Kommesk’s adequate risk-adjusted capitalisation, volatile operating performance and marginal business profile.

Kommesk’s level of risk-adjusted capitalisation continues to reflect its strategy of maintaining a significant capital buffer above minimum regulatory requirements, and is supported by retained earnings and equalisation reserves. Additionally, balance sheet strength benefits from a high quality reinsurance panel and an investment portfolio that is heavily skewed toward bonds and cash. In 2016, A.M. Best expects Kommesk’s risk-adjusted capitalisation to remain at an adequate level, supported by the substantial foreign exchange gains reported in the previous year. These gains arose from the company’s significant holdings of U.S. dollar-denominated investments, which benefited from the devaluation of the tenge in August 2015. However, material downside risk remains, as Kommesk’s balance sheet is exposed to intense competitive conditions in its domestic market and increasing asset risk due to Kazakhstan’s economic difficulties.

Kommesk’s operating performance remains volatile, as demonstrated by a profit after tax of KZT 3.37 billion in 2015 compared with KZT 312 million in the previous year. Earnings in 2015 were boosted by investment earnings of KZT 4.26 billion, which included significant foreign exchange rate gains. Kommesk’s technical performance continues to be constrained by high operating expenses and rising claims experience, as reflected in a reported combined ratio of 110.6% in 2015. Given the ongoing intense competitive conditions of the domestic insurance market, coupled with economic challenges, the company is likely to find it difficult to produce stable and profitable earnings growth.

Kommesk maintains a marginal business profile, as the 20th largest insurer in Kazakhstan (ranked by gross written premium) with a 1.6% market share in 2015. The company’s underwriting portfolio is heavily weighted toward compulsory motor third-party liability and health business, which are lines of business characterised by declining profitability. Kommesk therefore intends to further develop its voluntary third-party liability and motor hull segments, aided by its diversified distribution channels. A.M. Best believes that the company’s lack of diversification and small size limit Kommesk’s ability to defend its market position in an increasingly challenging operating environment.

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 see A.M. Best’s Recent Rating Activity web page.

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

Copyright © 2016 by A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160219005650/en/

A.M. Best
Charlotte Vigier
Senior Financial Analyst
+(44) 20 7397 0270
[email protected]
or
Deniese Imoukhuede
Associate Director, Analytics
+(44) 20 7397 0277
[email protected]
or
Christopher Sharkey
Manager, Public Relations
+(1) 908 439 2200, ext. 5159
[email protected]
or
Jim Peavy
Assistant Vice President, Public Relations
+(1) 908 439 2200, ext. 5644
[email protected]

Source: A.M. Best

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