Best’s News & Research Service - January 08, 2016 10:40 AM (EST)
A.M. Best Assigns Ratings to Insurance Company London-Almaty JSC
Oldwick //BestWire// - A.M. Best has assigned a financial strength rating of C++ (Marginal) and an issuer credit rating of “b” to Insurance Company London-Almaty JSC (London Almaty) (Kazakhstan). The assigned outlook for both ratings is stable.
The assigned ratings reflect London Almaty’s vulnerable business profile, volatile operating results and strong risk-adjusted capitalisation. The ratings also consider London Almaty’s exposure to the heightened country risk of its domestic market.
London Almaty is a small non-life insurer in Kazakhstan, ranking 24th out of 33 market participants, with gross written premium of KZT 2.9 billion (approximately USD 8.0 million) representing approximately 1% of market premium for the year to November 2015. Although the company has been operating under a new shareholding and management structure since the first half of 2015, London Almaty continues to focus on growing its corporate portfolio.
A.M. Best believes that London Almaty maintains a vulnerable business profile. This is demonstrated by the reduction of approximately a quarter of its premium volumes for the year to November 2015, following the loss of key personnel at the company. Additionally, London Almaty operates in a market that is susceptible to unexpected regulatory modifications, which can result in sudden changes in the company’s business profile.
Given these factors, A.M. Best believes that London Almaty’s ability to defend its market position against sudden adverse changes in operating conditions is likely to be limited, due to the company’s relatively small size and limited diversification.
London Almaty’s operating earnings are subject to volatility, mainly due to the wide variation in its technical results, as per the combined ratio of between 84.0% and 109.2% reported over the past five years. Performance is constrained by its high expenses and the lack of scale in operations, owing to the company’s substantial investments in infrastructure to support its expansion. Although London Almaty is implementing plans to reduce its cost base, A.M. Best believes that in the long-run the company will likely face challenges with its expansion, owing to the intense competitive conditions of its market and impact of the protracted deterioration in economic conditions on diminished growth opportunities.
London Almaty’s risk-adjusted capitalisation is maintained at a strong level, supported by retained earnings and a panel of reinsurers that maintain a solid credit profile. A negative rating factor is the quality of the company’s fixed income portfolio, with approximately half of its securities being issued by non-investment grade entities.
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 rating(s) 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.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source.