AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of "bbb-" of Victoria Insurance Company JSC (Victoria) (Kazakhstan). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Victoria’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, limited business profile and weak enterprise risk management.
Victoria’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by the Best’s Capital Adequacy Ratio (BCAR). The company has a track record of good internal capital generation, which has resulted in the accumulation of a large capital buffer to absorb potential volatility associated with its exposure to risk accumulations and its challenging operating environment. Offsetting factors for balance sheet strength include the exposure of the company’s asset base to high financial system risk in Kazakhstan, Victoria’s potential exposure to catastrophe losses, as well as its high gross risk appetite and a resulting dependence on reinsurance. Reinsurance is purchased on a facultative basis with international reinsurers of high credit quality.
Operating performance is strong, albeit subject to volatility, principally due to a frequently changing business strategy and fluctuations in investment returns. In 2019, Victoria reported after-tax earnings of KZT 7.0 billion (approximately USD 18.4 million), compared with KZT 9.0 billion (approximately USD 23.9 million) in the previous year. AM Best expects Victoria’s operating performance to be strong but volatile in the near term, partially due to foreign currency exchange fluctuations and resulting changes in the value of investments denominated in the U.S. dollar.
Victoria has a limited business profile as a small non-life insurer operating solely in Kazakhstan’s fragmented and competitive insurance market. Based on 2019 gross written premium, it ranked 11th among 20 non-life insurers with a market share of just 1.7%. In 2019, the company’s net written premium totaled KZT 4.9 billion (approximately USD 12.9 million), up 6% from the previous year due to a small increase in premium retention. In 2020, premium volumes are expected to decline, as the COVID-19-driven reduction in economic activity in Kazakhstan is likely to negatively impact insurance demand.
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