Azerbaijan, Baku, July 19 / Trend A. Badalova /
Fitch Ratings has upgraded Kazakhstan's AMANAT Insurance Insurer Financial Strength (IFS) rating to 'B' from 'B-' and National IFS rating to 'BB(kaz)' from 'B+(kaz)', the agency reported on Thursday. The Outlooks are Stable.
According to the report, the rating upgrade reflects the removal of regulatory risk associated with statutory capital requirements in 2011, adequate, albeit volatile, risk-adjusted capitalisation and signs of improvement in underwriting performance in five months of 2012.
The agency views negatively AMANAT's private ownership as the dividend withdrawal in the second quarter of 2012 raises some concerns over the company's capital management policy.
The investment portfolio of AMANAT is of weak credit quality, with substantial holdings of sub-investment-grade debt, a common feature for the insurance market in Kazakhstan, the agency says. The level of diversification is also low with a significant proportion of assets being concentrated in Kazakh banking groups. However, the liquidity profile of these investments is satisfactory, the agency believes.
According to the agency's estimates, the combined ratio of the company stood at 104.3 percent at end-five months of 2012 versus 113.7 percent in 2011.
Fitch says the ratings could be upgraded if the new management team proves its credibility and effectively enhances AMANAT's franchise through profitable growth. Conversely, failure to enhance AMANAT's operating profile would be viewed negatively, the report says.
According to the report, a deterioration of AMANAT's solvency margin to a level below 100 percent, in the absence of financial support from the shareholder as well as a material decrease in the credit quality of AMANAT's investments could also result in a downgrade.