A.M. Best has revised the outlooks to stable from negative and 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 ratings reflect Victoria’s balance sheet strength, which A.M. Best categorises as very strong, as well as its strong operating performance, limited business profile and weak enterprise risk management.
The revision of the outlooks to stable from negative reflects A.M. Best’s expectation that Victoria’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), will remain at the strongest level, with a material buffer to absorb the impact of any adverse developments related to its operating environment. The acquisition of JSC Insurance Company Nurpolicy (Nurpolicy) in November 2018 has had only a modest impact on the company’s risk-adjusted capitalisation and business profile, due to its relative small size. A.M. Best also expects Victoria’s overall business profile to remain limited. A reduction in exposure to fronting contracts and an increase in premium retention rates were positive developments in 2018.
Victoria’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by 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 a 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, as well as its high gross risk appetite and a resulting dependence on reinsurance.
Operating performance is strong, albeit subject to volatility, principally due to a frequently changing business strategy and fluctuations in investment returns. In 2018, Victoria reported after-tax earnings of KZT 9.1 billion (approximately USD 23.7 million), compared with KZT 4.9 billion (approximately USD 12.8 million) in the previous year.
Victoria has a limited business profile as a small non-life insurer operating solely in Kazakhstan’s fragmented and competitive insurance market. Based on 2018 gross premium written, it ranked 15th out of 24 non-life insurers with a market share of just 1.4%. In 2018, the company’s net written premium totaled KZT 4.6 billion (approximately USD 11.9 million), up 35% from the previous year due to a modest increase in premium retention.
During 2019, Victoria is expected to develop the online motor third party liability business and to grow its profitable corporate clients’ portfolio.
