A.M. Best Affirms Ratings of JSC Insurance Company Centras Insurance

LONDON--(BUSINESS WIRE)-- A.M. Best has affirmed the financial strength rating of C++ (Marginal) and the issuer credit rating of “b” of JSC Insurance Company Centras Insurance (Centras) (Kazakhstan). The outlook for both ratings is stable.

The ratings reflect Centras’ volatile risk-adjusted capitalisation, ongoing weak technical performance and marginal business profile.

Centras’ risk-adjusted capitalisation remains subject to significant volatility. Based on regulatory filings, the company’s risk-adjusted capitalisation strengthened in 2015, primarily due to the impact of exchange rate gains that boosted retained earnings. This improvement in risk-adjusted capitalisation is in contrast to past trends, when the company required capital contributions of KZT 300 million and KZT 319 million during the first half of 2015 and in 2014, respectively, to support its regulatory solvency margin. In view of Centras’ business plan, which targets double-digit annual growth in the near term, and the adverse impact of intense competitive conditions on technical margins, A.M. Best expects that in the medium to longer term, Centras will remain dependent on further shareholder contributions to support its expansion.

Although Centras’ operating performance significantly improved in 2015, the company’s technical results deteriorated materially, with a combined ratio of 119.4% compared with 106.8% in the previous year. The weak results were due to a high frequency of losses arising from the compulsory motor third-party liability (MTPL) and motor hull accounts, as well as the ongoing impact of elevated expense levels, with a ratio of operating expenses relative to net written premium of 59.4% (2014: 57.1%). Centras’ much-improved earnings reflected a KZT 2 billion foreign exchange gain on its large holdings of U.S. dollar-denominated investments, following the devaluation of the tenge in August 2015.

Centras’ business profile is marginal, with gross written premium (GWP) of KZT 5.8 billion in 2015, equating to a 2.0% share of the market. In response to deteriorating operating conditions in the domestic insurance market, the company has tried to diversify its portfolio away from its core compulsory MTPL business. However, due to the 12% contraction in Centras’ overall premium income, resulting from the cancellation of one large fronting contact, the proportion of MTPL business actually increased to 37% of GWP in 2015 compared with 33% in the previous year. With protracted negative pressures underpinning the domestic market, economically and competitively, A.M. Best believes that Centras will struggle to profitability expand its portfolio in line with its growth plans.

This press release relates to rating(s) that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2016 by A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160219005659/en/

A.M. Best
Charlotte Vigier, +(44) 20 7397 0270
Senior Financial Analyst
[email protected]
or
Deniese Imoukhuede, +(44) 20 7397 0277
Associate Director, Analytics
[email protected]
or
Christopher Sharkey, +(1) 908 439 2200, ext. 5159
Manager, Public Relations
[email protected]
or
Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best

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