Baku, Azerbaijan, May 5
By Elena Kosolapova - Trend:
Standard & Poor's Ratings Services affirmed its 'B' insurer financial strength and counterparty credit ratings on Kazakhstan-based Grain Insurance Co. JSC, the international rating agency reported on May 5. The outlook is stable.
At the same time, the agency affirmed its 'kzBB+' Kazakhstan national scale rating on the company.
"The ratings reflect our view of Grain Insurance's highly vulnerable business risk profile, owing to a weak competitive position, and its weak financial risk profile, due to a small capital base and high exposure to 'B' rated investments. The anchor 'b+' is one notch higher than that proposed by the combination of the business and financial risk profiles, because the business risk profile--particularly the competitive position--has been strengthening and we expect this trend to continue," S&P said.
The rating is one notch lower than the 'b+' anchor because the agency regards Grain Insurance's enterprise risk management (ERM) as weak.
In S&P view, Grain Insurance is exposed to moderate industry and country risk, reflecting the assessment of Kazakhstan's property/casualty insurance sector. However, Grain Insurance's industry risk profile is somewhat different from that of other insurers in Kazakhstan, given its focus on agricultural insurance, which poses higher product risk than other lines of business.
Grain Insurance has a weak competitive position, in S&P view, mainly stemming from its very small size and predominant focus on a single sector. This exposes it to legislative or industry changes, which could be large, given the government's role in crop insurance.
The stable outlook reflects the view that Grain Insurance's capital adequacy should remain extremely strong over the next 12 months, despite a weak competitive position and high risk profile.
A negative rating action within 12 months is unlikely unless there is a further weakening of credit quality in the investment portfolio.
A positive rating action within 12 months will largely depend on improvements in the competitive position. The agency would look for evidence of not only rapid premium growth, but also a sound and stable operating performance. Improvements in the credit quality of the investment portfolio and ERM practices could also trigger a positive rating action.
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