LONDON--(BUSINESS WIRE)--A.M. Best has downgraded the Financial Strength Rating to C+ (Marginal) from C++ (Marginal) and the Long-Term Issuer Credit Rating to “b-” from “b” of JSC Salem Insurance Company (Salem) (Kazakhstan). Concurrently, A.M. Best has revised the outlooks for these Credit Ratings (ratings) to negative from stable.
The rating downgrades reflect the deterioration of Salem’s risk-adjusted capitalisation at year-end 2016 to a level outside of A.M. Best’s expectations. This decline follows rapid premium growth in 2016 combined with further erosion of capital, despite a capital injection from company shareholders during the year. In 2016, the company grew its gross and net written premiums by 74% and 30%, respectively. Capital and surplus declined to KZT 2.1 billion, reflecting retained losses of KZT 1.4 billion, partly offset by the capital injection of KZT 240 million in 2016.
The negative outlook reflects A.M. Best’s concern that the company’s risk-adjusted capitalisation could decline further in 2017, as evidenced by its marginal regulatory solvency ratio during 2017 (1.00 as of 1 May 2017). This could potentially be driven by premium growth and/or continuation of losses in the absence of substantial capital injections. A.M. Best will continue to closely monitor the development of Salem’s risk-adjusted capitalisation.
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