BAKU, Azerbaijan, Nov.9
By Nargiz Sadikhova – Trend:
Fitch Ratings has affirmed Kazakhstan-based Life Insurance Company Standard Life’s Insurer Financial Strength (IFS) Rating at 'B' and the National IFS Rating at 'BBB-(kaz)', the outlooks are Stable, Trend reports with reference to the report.
“The ratings reflect Standard Life's weak risk-adjusted capital position, less favorable business profile and high duration mismatch between the company's long life insurance reserves and significantly shorter investment instruments backing those reserves. These factors are partially offset by the insurer's improved investment risk and robust financial performance,” the report said.
According to the agency, Standard Life's risk-adjusted capital position, as measured by Fitch's Prism Factor-Based Model (Prism FBM) score, remained below 'Somewhat Weak' and weakened further at end-2018 from end-2017. Standard Life remains compliant with regulatory capital requirements, with a solvency margin of 146 percent during nine months of 2019.
Fitch assesses Standard Life's business profile as less favorable than other Kazakh players' due to the insurer's small size and limited diversification of the insurer' distribution channels. Fitch notes that Standard Life managed to achieve the double-digit growth in non-life segment without accepting major local accounts with an unfavorable claims history.
“On the life insurance side, net business volumes grew by 169 percent in nine months of 2019 from nine months of 2018, with pension annuity business driving the growth and accounting for 51 percent of net written premiums in nine months 2019,” the report said.
Furthermore, Standard Life increased sales of protection-type insurance policies which accounted for seven percent of net written premiums in nine months of 2019 compared to one percent last year.
“Like its local peers Standard Life remains exposed to a meaningful duration mismatch on its balance sheet, driven by the pension annuity business. Standard Life saw a notable improvement in the average credit quality of its investment portfolio as the share of investment-grade bonds grew to 44 percent at end-9M2019 from 21 percent at end-2018. The company simultaneously reduced its exposure to lower-rated bank deposits,” the report said.
The ratings could be upgraded if Standard Life improves its business diversification and reduces the mismatch between its assets and liabilities provided that the company adheres to sound underwriting practices and maintains the credit quality of its investment portfolio.
The ratings could be downgraded if Standard Life's capital position or financial performance weakens significantly.
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