Best’s News & Research Service - August 24, 2017 10:13 AM (EDT)
A.M. Best Assigns Credit Ratings to Nomad Life Insurance Company JSC
- August 24, 2017 10:13 AM (EDT)
London //BestWire// - A.M. Best has assigned the Financial Strength Rating of B- (Fair) and the Long-Term Issuer Credit Rating of “bb-” to Nomad Life Insurance Company JSC (Nomad Life) (Kazakhstan). The outlook assigned to these Credit Ratings (ratings) is stable. Nomad Life is a wholly owned subsidiary of Nomad Insurance Group Limited, a non-operating holding company also domiciled in Kazakhstan.
The ratings of Nomad Life reflect its adequate risk-adjusted capitalisation, volatile operating performance and established business profile in the local life insurance market. The ratings also consider Nomad Life’s limited diversification and the high country risk of Kazakhstan.
Nomad Life’s risk-adjusted capitalisation is constrained by its relatively high net underwriting leverage, stemming mainly from its significant reserve provisions, as well as a track record of onerous dividend payments. Furthermore, the company’s asset base is exposed to the high financial system risk in Kazakhstan.
Nomad Life’s operating performance has been positive, albeit volatile in recent years, as demonstrated by its weighted average return on equity of 71.3%, which ranged from 13.4% to 158.1% between 2012 and 2016. The company benefits from good investment income reflective of the high interest and inflation rate environment in Kazakhstan.
Nomad Life’s exposure to the compulsory workers’ compensation segment is a negative rating factor due to the potential for large and long tail losses. This concern is exacerbated following the discontinuation of its treaty reinsurance protection in 2016, which has increased the company’s net exposure to workers’ compensation risks. In the first half of 2017, almost a half of Nomad Life’s portfolio was derived from this segment.
Nomad Life has an established business profile in Kazakhstan, with a 23% share of the local life market, measured by gross written premiums in the first half of 2017. Nonetheless, in A.M. Best’s opinion, Nomad Life’s relatively small size (by international standards) leaves the company susceptible to sudden changes in its operating or regulatory environment, which are typical for the Kazakh insurance market.
This press release relates to Credit 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 see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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