LONDON--(BUSINESS WIRE)--A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of B+ (Good) and the issuer credit rating of “bbb-” of Halyk-Life, Life Insurance Subsidiary Company of Halyk Bank of Kazakhstan, JSC (Halyk-Life) (Kazakhstan). The outlook for both ratings is stable.
Halyk-Life’s risk-adjusted capitalisation remains at an adequate level. The company’s capital adequacy, as measured by Best’s Capital Adequacy Ratio (BCAR), is increasingly constrained by its on-going expansion, as the rise in capital required to support underwriting exposure continues to outpace the growth of reported surplus. In 2012, gross written premiums increased by 71% to KZT 10 billion, partly due to new regulations enforcing the transfer of the workers’ compensation business from its sister company, Halyk-Kazakhinstrakh, Insurance Subsidiary Company of Halyk Bank of Kazakhstan, JSC (Kazakhstan) to Halyk-Life. This is compared to the rise in shareholders’ funds to KZT 2.7 billion in 2012 (2011: KZT 2.4 billion).
Risk-adjusted capitalisation was also impacted by Halyk-Life’s risky investment appetite in 2012, owing to the company’s sizeable holdings in sub-investment grade fixed income securities. Halyk-Life’s investment strategy leaves it vulnerable to the high financial system risk of Kazakhstan. A.M. Best will continue to closely monitor Halyk-Life’s growth and investment strategy and its impact on risk-adjusted capitalisation. Halyk-Life is expected to maintain risk-adjusted capitalisation at a level sufficient to support its business plans.
Halyk-Life’s operating performance is solid. The company reported a pre-tax profit of KZT 521 million in 2012 (2011: KZT 249 million), equating to a return on capital and surplus of 18.1% (2011: 8.7%).
Halyk-Life’s business profile is supported by its affiliation with the Halyk group, a financial services organisation wholly owned by a leading retail bank in Kazakhstan, Halyk-Bank. Halyk- Life operates within the relatively new, albeit growing, life sector and benefits from the provision of annuity business from its other sister company, Pension Fund of Halyk Bank, which maintains a 33% share of the Kazakh pensions market. Halyk-Life also leverages on its relationship with Halyk-Bank by taking advantage of its distribution network. The company distributes its products through a network of branch offices and agents.
No upward rating actions are expected in the near term. Negative rating actions could occur if Halyk- Life experiences deterioration in the quality and performance of its bond portfolio. Furthermore, a continuation of its declining trend in risk-adjusted capitalisation to a level considered below A.M. Best’s expectations could also result in negative rating actions. A decline in country risk fundamentals could also have a negative impact on Halyk-Life’s ratings.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding Universal BCAR”; “Evaluating Country Risk”; “Rating Members of Insurance Groups”; and “Understanding BCAR for Life/Health Insurers”. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.