Best’s News & Research Service - November 26, 2014 11:54 AM (EST)
A.M. Best Affirms Ratings of Standard Insurance Company, JSC
London //BestWire// - A.M. Best has affirmed the financial strength rating of "B-" (Fair) and the issuer credit rating of "bb-" of Standard Insurance Company, JSC (Standard) (Kazakhstan). The outlook for both ratings remains stable.
The ratings of Standard reflect its marginal risk-adjusted capitalisation, improving operating performance and developing business profile in the domestic Kazakh insurance market.
Standard's marginal risk-adjusted capitalisation reflects the company's strategy to maintain a 10% buffer above minimum regulatory requirements. Standard's balance sheet is protected by a conservative investment portfolio consisting mainly of cash deposits and fixed-income securities. Additionally, the company places the majority of its business with a secure panel of reinsurers. In 2014, Standard revised its outwards reinsurance programme on some of the profitable lines of business, which resulted in a rise of the net premium retention ratio to 65% as at the end of October 2014 compared with 44% at year-end 2013. The increased volume of business retained on Standard's own account in 2014 is expected to be supported by internal capital generation.
As a start-up insurer, Standard continues to incur a high, albeit reducing, level of administrative expenses associated with the development of infrastructure to support its expansion. Based on unaudited regulatory returns, Standard reported a combined ratio of 98.8% with an expense ratio of 62.7% as at the end of October 2014, compared with a combined ratio of 118.4% and an expense ratio of 83.8% reported for the full year of 2013. In the near term, A.M. Best expects Standard's operating performance to improve, reflecting the relatively low loss frequency in Kazakhstan and decreasing expense pressures as the company expands.
Standard maintains a modest business profile in the domestic insurance sector, with a 1.7% market share as at the end of September 2014, based on gross written premiums. Following its acquisition by a consortium of private investors at year-end 2011, the company is developing its voluntary and corporate insurance business by establishing sales points and expanding its direct distribution channel, thereby reducing its reliance on high-cost agency network.
Positive rating actions will depend on Standard demonstrating a track record of solid underwriting performance whilst strengthening risk-adjusted capitalisation. Worse than expected underwriting results, a decline in the quality of its investments or reinsurance protection, or deterioration in risk-adjusted capitalisation could result in negative rating actions.
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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilised:
- Risk Management and the Rating Process for Insurance Companies
- Rating New Company Formations
- Understanding Universal BCAR
- Catastrophe Analysis in A.M. Best Ratings
- Evaluating Country Risk
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
This press release relates to 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 visit A.M. Best's Ratings & Criteria Center.