The U.S. leads the pack in the percentage of older adults who have trouble paying their medical bills.
A.M. Best Europe – Rating Services Limited has upgraded the financial strength rating to B++ (Good) from B+ (Good) and the issuer credit rating to “bbb” from “bbb-” of Halyk-Kazakhinstrakh, Insurance Subsidiary Company of Halyk Bank of Kazakhstan, JSC (Kazakhinstrakh) (Kazakhstan). The outlook for both ratings is stable.
The rating upgrades for Kazakhinstrakh reflect its strong underwriting results and good competitive position in the Kazakhstan market, which has consistently supported strong financial performance over the last five years. The ratings also incorporate Kazakhinstrakh’s risk-adjusted capitalisation, which remains at a sufficiently strong level.
Kazakhinstrakh continues to enjoy a leading position as an insurer in Kazakhstan, maintaining a 15% share of the market in 2011. Gross written premiums are expected to grow by 65% to KZT 24 billion in 2011 due to a large one-off offshore oil fronting contract, as well as growth within its compulsory and medical insurance lines. Kazakhinstrakh’s portfolio is mainly focussed on retail business.
The company has opened a number of new branches by leveraging on its relationship with its owner, Halyk Bank, thereby taking advantage of its network. The company has also benefited from cross-selling opportunities, which has had a positive effect on sales. Prospective growth is expected to continue to be supported by Kazakhinstrakh’s excellent position within the medical insurance market.
Kazakhinstrakh’s financial performance remains strong, as demonstrated by a five-year average return on capital and surplus of 20%. Earnings are consistently supported by excellent technical results (on an International Financial Reporting Standard basis), with a combined ratio not higher than 85% since 2006. In 2011, the company is expected to report a pre-tax profit of approximately KZT 2.7 billion, reflecting a continuation of its strong underwriting performance, driven by a stable cost base and increased earned premiums, and a more favourable investment environment.
Kazakhinstrakh maintains strong risk-adjusted capitalisation, supported by higher retained earnings and a rise in capital, following an injection from its parent in 2008 and 2009. The company is exposed to some reinsurers with vulnerable or no ratings, as well as to sub-investment grade debt securities issued in the local Kazakh market, exposing Kazakhinstrakh to the high political and financial system risk of the country.
A negative rating factor relates to the company’s catastrophe exposure modelling capabilities, which A.M. Best considers to be underdeveloped by international standards and could leave the company exposed to significant losses from a major event. Risk-adjusted capitalisation incorporates a buffer to cushion against such losses.
Upward rating actions could occur if Kazakhinstrakh reduced its exposure to poorly rated reinsurers and sub-investment grade securities. Improvement in the company’s loss modelling and enterprise risk management may also put upward pressure on the ratings.
Negative rating actions could occur if the company experienced a large technical loss or a deterioration in the performance of the company’s bond portfolio. A decline in country risk fundamentals could also have a negative impact on Kazakhinstrakh’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”; “Assessing Country Risk”; “Rating Members of Insurance Groups”; and “Understanding BCAR for Property/Casualty Insurers”. Best’s Credit Rating Methodology can be found at http://www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures:http://www3.ambest.com/emea/ambersdisclosure.pdf.
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.