LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of C+ (Marginal) and the Long-Term Issuer Credit Rating of “b-” of JSC Insurance Company Centras Insurance (Centras) (Kazakhstan). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Centras’ balance sheet strength, which A.M. Best categorises as adequate, as well as its marginal operating performance, very limited business profile and weak enterprise risk management.
Centras’ risk-adjusted capitalisation improved in 2017, driven by an increase in retained earnings. The company’s risk-adjusted capitalisation has been volatile, and could deteriorate from the level achieved in 2017, due to potentially material dividend payments over the next two years. Factors that negatively affect the balance sheet strength assessment are the company’s weak financial flexibility and its elevated investment risk profile, due to the high financial system risk in Kazakhstan.
Centras’ performance has been volatile, with return on equity ranging between -22.7% and 39.7% over the 2012-2016 period. Technical performance is weak with losses in each of the past six years, and demonstrated by a five-year weighted average combined ratio of 115.4% (2012–2016). Underwriting performance in 2017 benefited from a rise in net earned premiums due to strong growth in net written premiums (NWP) in 2016. The company generated net profit of KZT 392.3 million (2016: KZT 153.3 million) for the year, supported by a material income from exchange gains (KZT 228.8 million).
In 2017, Centras remained the seventh largest of 25 Kazakh non-life insurers with a 4% market share, after posting gross written premium (GWP) growth of 91.0% in 2016. The company saw a decline in GWP in 2017 due to a reduction in its fronted third-party liability business, while NWP remained largely flat due to stable premium income in its core motor third-party liability portfolio. The company’s relatively small size and limited diversification may limit its ability to defend its market position in challenging market conditions.
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