S&P talks credit & financial strength ratings of Kazakhstan's London Almaty Insurance Co
BAKU, Azerbaijan, Dec. 20
By Nargiz Sadikhova - Trend:
S&P Global Ratings assigned its 'BB-' long-term issuer credit and financial strength ratings and 'kzA-' national scale rating to London Almaty Insurance Co. JSC (LA), Trend reports with reference to S&P report.
The outlook is stable on the global scale ratings.
“The ratings are based on our view of LA's competitive standing in Kazakhstan's corporate insurance market, which is supported by solid capital adequacy and sufficient reinsurance protection, supporting its proposition for corporate clients,” the report said.
The rating agency expects that LA will sustain performance with a return on equity of 12-15 percent and annual net income close to 1 billion tenge ($2.6 million) in the next three years.
“Capital was redundant at the ‘AAA’ level as of Jan. 1, 2019, under our capital model, and we expect this level to be maintained in the next three years. The company's capital is small in absolute terms making it vulnerable to large losses. However, we note that LA has sufficient reinsurance cover in place,” the report said.
Agency also notes that the average quality of the investment portfolio improved to 'BBB-' from 'BB' as of Oct. 1, 2019.
“We believe this improvement is sustainable, stemming from the reallocation of investments from lower-rated bank deposits to investment-grade sovereign or quasi-sovereign fixed income instruments,” the report said.
S&P notes that LA has exposure to foreign exchange risk, like many other Kazakhstani insurers. The overall foreign exchange position accounts for the majority of total investments, most of which are in US dollars.
“The stable outlook reflects our expectation that, over the next 12 months, LA will continue expanding rapidly while sustaining positive underwriting performance and further improving the quality of its investment portfolio,” the report said.
The agency views a positive rating action as remote in the next 12 months, unless the company significantly builds up capital in absolute terms, while simultaneously improving its competitive standing.
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