A.M. Best Assigns Ratings to Victoria Insurance Company JSC

FOR IMMEDIATE RELEASE

LONDON, FEBRUARY 26, 2013
A.M. Best Europe – Rating Services Limited has assigned a financial strength rating of B+ (Good) and an issuer credit rating of “bbb-” to Victoria Insurance Company JSC (Victoria) (Kazakhstan). The outlook assigned to both ratings is stable.

The ratings reflect Victoria’s excellent level of risk-adjusted capitalisation, strong historical underwriting results and reasonable prospective business plans. An offsetting factor is Victoria’s changing product portfolio as it develops other lines of business following a recent change to (re)insurance regulations in Kazakhstan.

Victoria’s level of risk-adjusted capitalisation is supported by a relatively large capital base and low premium to capital ratio. Based on unaudited preliminary results from the local regulator in 2012, Victoria’s capital and surplus amounted to KZT 46.7 billion (approximately USD 310 million), which represented roughly one-fifth of the total capital and surplus of the entire domestic insurance market. In 2012, net written premium is expected to be around KZT 2.0 billion (approximately USD 13 million), compared to KZT 3.9 billion in the previous year. The fall in premium income was largely driven by a change in reinsurance regulation, and as a result, Victoria was unable to continue fronting several large risks.

Underwriting performance has been excellent in each of the past five years. Despite a large dividend payment of KZT 6.2 billion during the year, preliminary results in 2012 look strong. However, previous results are not indicative of future performance, given the company’s changing business profile. Until 2010, the company derived the majority of its business from a group affiliate, whilst from 2010 almost all business was related to third parties with a low level of risk retention. Partially as a result of new regulations that impose a minimal level of retention and enforce minimum standards on the credit quality of foreign reinsurers, Victoria’s business profile will continue to evolve. As such, the company plans to grow its reinsurance portfolio as well as retail lines of business largely through banking relationships.

Positive rating actions could occur if Victoria is able to generate a good, stable business profile whilst maintaining strong technical results, and demonstrates that risk management adequately matches it growing portfolio.

Negative rating actions could occur if Victoria is unable to adequately manage its accumulation and catastrophe risks as it develops its business. Whilst there is some room for deterioration in underwriting performance and risk-adjusted capitalisation before negative rating pressure could occur, any significant and unexpected weakening could result in a negative rating action.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides an extensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies”; “Evaluating Country Risk”; “Catastrophe Analysis in A.M. Best Ratings”; “Rating Members of Insurance Groups”; “Understanding Universal BCAR for Property/Casualty Insurers”; and “Understanding Universal BCAR”. Best’s Credit Rating Methodology can be found at http://www.ambest.com/ratings/methodology.

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.

A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.