LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of B- (Fair) and the Long-Term Issuer Credit Rating of “bb-” of Nomad Life Insurance Company JSC (Nomad Life) (Kazakhstan). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Nomad Life’s balance sheet strength, which A.M. Best categorises as strong, as well as its strong operating performance, limited business profile and weak enterprise risk management.
Nomad Life’s balance sheet strength benefits from risk-adjusted capitalisation being at the strong level, as measured by Best’s Capital Adequacy Ratio. However, risk-adjusted capitalisation is subject to volatility due to reserve movements in the company’s workers’ compensation account (approximately 40% of the net premium written). Furthermore, the company’s asset base is highly exposed to the high financial system risk in Kazakhstan.
Nomad Life’s operating performance is strong, albeit volatile, as demonstrated by a weighted five-year average return on equity of 70.7% (2013–2017), which has ranged between 13.4% and 158.1% over this period. The company’s performance generally benefits from a high level of investment income, reflective of the high interest and inflation rate environment in Kazakhstan. Prospective performance is likely to remain volatile due to fluctuating levels of reserves and investment earnings, as well as uncertainty regarding the profitability of the company’s expanding life book.
Nomad Life has an established business profile in Kazakhstan, with a 23% share of the local life market, measured by gross written premium in 2017. A.M. Best expects moderate growth going forward, driven by savings business and pension annuities following changes in regulation that will create opportunities for these products. An offsetting factor for business profile is the company’s exposure to sudden changes in the operating or regulatory environment, which are typical in the Kazakh insurance market. In addition, the principal line of business written is compulsory workers’ compensation business, which A.M. Best considers high risk.
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