LONDON–(BUSINESS WIRE)–AM Best affirmed the financial strength rating of B+ (good) and the issuer’s long-term credit rating of “bbb-” (good) of Victoria Insurance Company JSC (Victoria) (Kazakhstan). The outlook for these Credit Ratings (ratings) is stable.
The ratings reflect Victoria’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and weak business risk management.
Victoria’s balance sheet strength is underpinned by top-tier risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and its relatively conservative and liquid investment portfolio. A strong internal capital generation track record has resulted in the accumulation of a significant capital cushion to absorb the potential volatility associated with Victoria’s exposure to risk aggregation and its challenging operating environment. Victoria purchases reinsurance on a facultative basis from high credit quality international reinsurers, but does not have catastrophe reinsurance protection, which is an offsetting rating factor given the company’s exposure earthquake risk in Kazakhstan. The ratings also take into account Victoria’s exposure to the high levels of economic, political and financial risk associated with operating primarily in Kazakhstan, as well as the current uncertainty about the impact on Kazakhstan’s economy of sanctions imposed on Russia in response to the conflict in Ukraine. .
Victoria’s underwriting performance has been strong, evidenced by a five-year (2017-2021) weighted average combined ratio of 69.2% (as calculated by AM Best). However, underwriting results have been volatile due to a frequently changing underwriting strategy and infrequent and very severe claims in its liability portfolio. In 2021, Victoria reported an overall unaudited pre-tax profit of KZT 7.2 billion (approximately $16.6 million), compared to KZT 9.4 billion (approximately $22.3 million) reported the year previous year, supported by high investment returns, reflecting the high inflationary environment. in Kazakhstan. AM Best expects Victoria’s operating performance to remain strong, although potentially volatile due to exposure to changes in the value of US dollar-denominated investments due to exchange rate fluctuations.
Victoria has a limited business profile as a small non-life insurer operating solely in Kazakhstan’s fragmented and competitive insurance market. Based on 2021 gross written premiums (GWP), it has a market share of just 1.0%. In 2021, the company’s GWP stood at KZT 4.2 billion (about USD 9.6 million), down 6% from the previous year. This reduction is mainly due to the measures taken by the company to reduce the size of its voluntary liability portfolio by applying stricter underwriting criteria.
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