BAKU, Azerbaijan, May 6
By Nargiz Sadikhova - Trend:
Fitch Ratings agency has affirmed insurer financial strength (IFS) rating of Kazakhstan-based Freedom Finance Life JSC life insurance company at 'B' and the National IFS Rating at 'BB(kaz)', with stable outlooks, Trend reports with reference to Fitch.
The Fitch has also simultaneously withdrawn the ratings. The agency said that ratings were withdrawn for commercial reasons.
“The rating actions are based on Fitch's current assessment of the impact of the coronavirus pandemic, including its economic impact, under a set of rating assumptions. These assumptions were used by Fitch to develop pro-forma financial metrics for Freedom Life that are compared with both rating guidelines defined in its criteria, and relative to previously established rating sensitivities for Freedom Life,” the report said.
The report said that the affirmation of the ratings reflects the limited impact of the pandemic on Freedom Life's key operating performance metrics and investment and liquidity ratios under Fitch's pro-forma analysis.
“Our pro-forma analysis factors in heightened pressure on the insurer's risk-adjusted capital position, as measured by Fitch's Prism factor-based capital model (FBM). However, this risk is offset by the insurer's strong buffer over required regulatory capital,” Fitch said.
Fitch noted that it used the following key assumptions, which are designed to identify areas of vulnerability, in support of the pro-forma ratings analysis discussed above:
- Decline in key stock market indices by 35 percent relative to January 1, 2020.
- Increase in two-year cumulative high-yield bond default rate to 13 percent, applied to current non-investment grade assets, as well as 12 percent of 'BBB' assets.
- For the non-life and reinsurance sectors, a negative impact on the industry-level accident year loss ratio from COVID-19-related claims at 3.5 percent points, partially offset by a favorable impact from the auto line averaging 1.5 percent points.
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