Fitch affirms Kazakh insurance company's rating

Fitch affirms Kazakh insurance company's rating

Baku, Azerbaijan, Nov. 25

By Nigar Guliyeva - Trend:

Fitch Ratings has affirmed Kazakhstan-based JSC Insurance Company AMANAT's Insurer Financial Strength (IFS) Rating at 'B' and National IFS Rating at 'BB+(kaz)' and removed them from Rating Watch Negative (RWN). The Outlooks are Stable.

The agency reported that AMANAT's ratings were placed on RWN in July 2017 following the decision of the National Bank of Kazakhstan to suspend AMANAT's license for compulsory lines of business for three months effective 5 July 2017 due to a number of violations, including failure to implement recovery measures and inaccuracies in solvency margin calculations.

"AMANAT's gross written premiums (GWP) fell 26% yoy in the three months following the license suspension; however, on a net basis the reduction was only 12% and Fitch does not believe that the company's franchise has been significantly damaged by the suspension. Its GWP in the first 10 months of 2017 grew 6% yoy, due to aggressive growth in the compulsory motor third-party liability (MTPL) segment in 1H17. the reports reads.

Fitch views prudent underwriting in the MTPL segment as crucial to the company's future ability to the underwriting business. Aggressive growth, accompanied by weak underwriting results, would be credit-negative, it adds.

AMANAT's shareholder injected additional capital of 300 million tenge as required by the National Bank in October 2017. As a result, the regulatory solvency margin stood above the minimum requirement of 100% at end-October 2017.

Fitch believes that AMANAT's risk-adjusted capital position will strengthen in 2017 due to slightly decreased net business volumes, though the company's Fitch-calculated Prism Factor-Based Model (FBM) score is expected to remain within the higher range of 'Somewhat Weak' category.

For the first 10 months of 2017 AMANAT reported net profit of 366 million tenge, down from 659 million tenge a year ago, as stronger investment returns offset a modest underwriting loss. Its return on equity decreased to 10% from 20% during the same period.

The official exchange rate for November 25 is 330.39 KZT / USD.

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