LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb+” of Eurasia Insurance Company JSC (Eurasia) (Kazakhstan). The outlook of the Long-Term ICR remains negative, whilst the outlook of the FSR remains stable.
The Credit Rating (rating) affirmations reflect Eurasia’s good albeit volatile technical performance, excellent risk-adjusted capitalisation and solid business profile in Kazakhstan. Offsetting rating factors are the company’s exposure to difficult operating conditions in its core markets and the elevated risk profile of its parent, the Eurasian Financial Company JSC (Eurasian Financial).
The negative outlook on the company’s Long-Term ICR reflects A.M. Best’s view that the level of financial flexibility Eurasia derives from Eurasian Financial continues to be pressured due to the weak credit profile of the group’s largest subsidiary, Eurasian Bank JSC. The bank maintains low regulatory capital adequacy and has a material asset risk exposure. Additionally, A.M. Best believes that Eurasia’s prospective underwriting results will likely be affected by the elevated level of economic risk in Kazakhstan, as well as soft pricing and significant competitive pressures in the global reinsurance market in which it currently maintains a limited business profile.
In 2016, Eurasia reported a good combined ratio of 64.3% (2015: 139.0%), underpinned by relatively benign claims experience, reserve releases on its property and workers’ compensation portfolios and strong premium growth. Additionally, the stabilisation of the Tenge / U.S. dollar exchange rate supported the performance of Eurasia’s international portfolio. In contrast, in 2015, a significant devaluation of the local currency led to material reserve strengthening.
Eurasia’s risk-adjusted capitalisation declined in 2016 due to an increase in its underwriting risk, but remained at an excellent level. The company’s balance sheet is supported by a high level of earnings retention and its shareholders’ strategy of reinvesting a large proportion of dividends into the insurer’s paid-up capital. Eurasia’s substantial capital buffers, strong shareholder commitment and regulatory safeguards on the extraction of capital from an insurance company are factors that partially alleviate A.M. Best’s concerns regarding the potential for a sudden decline in Eurasia’s risk-adjusted capitalisation.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.