Best’s News & Research Service - August 20, 2020 11:35 AM (EDT)
AM Best Affirms Credit Ratings of Eurasia Insurance Company JSC
- August 20, 2020 11:35 AM (EDT)
London //BestWire// - AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” of Eurasia Insurance Company JSC (Eurasia) (Kazakhstan). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Eurasia’s balance sheet strength, which AM Best categorises as strong, as well as the company’s strong operating performance, neutral business profile and appropriate enterprise risk management.
Eurasia’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which is consistently maintained above the minimum requirements for the strongest assessment, providing the company with sufficient capital buffers to absorb the impact of adverse fluctuations in its operating environment. Eurasia has low dependence on reinsurance and employs a conservative reserving approach that has led to reserve redundancies in recent years. Whilst the company has taken steps to improve the quality of its investment portfolio, its asset base remains heavily exposed to the high financial system risk in Kazakhstan, which is an offsetting rating factor. In addition, AM Best notes the weaker credit profile of Eurasia’s parent, Eurasian Financial Company JSC (EFC), primarily due to the parent’s ownership of JSC Eurasian Bank. As a result, in AM Best’s opinion, Eurasia derives limited financial flexibility and liquidity from its parent. Nonetheless, no rating drag has been applied to Eurasia’s ratings from EFC, in view of regulatory restrictions in Kazakhstan that prohibit extraction of capital from a subsidiary to its detriment.
Eurasia’s operating performance is strong, with the company reporting a five-year weighted average combined ratio of 88.9% and return on equity of 21.6% (2015-2019). Whilst technical results have been subject to volatility, the company has reported positive operating earnings in each of the past 10 years, supported by solid investment returns. Underwriting results have improved and been less volatile in recent years, and Eurasia’s operating performance over the cycle is in line with AM Best’s expectation for the strong assessment.
Eurasia has a dominant role in the local (re)insurance market and benefits from geographic diversification through international inward reinsurance. It is the largest (re)insurance company in Kazakhstan, with a market share of 18.2% based on 2019 combined non-life and life market premiums (29.8% share of the non-life market). Its international reinsurance portfolio provides diversification and accounts for 30% of premiums written at year-end 2019. This business primarily emanates from the United States, India and the United Kingdom, where the company maintains long-standing relationships with its cedants. However, Eurasia faces strong competition in its international markets from companies with more established profiles.
This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.