AM Best Affirms Credit Ratings of Eurasia Insurance Company JSC
AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of "bbb+" (Good) of Eurasia Insurance Company JSC (Eurasia) (Kazakhstan). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Eurasia's balance sheet strength, which AM Best assesses as strong, as well as the company's strong operating performance, neutral business profile and appropriate enterprise risk management.
Eurasia's balance sheet strength assessment is underpinned by a level of risk-adjusted capitalisation that is consistently maintained above the minimum guideline for the strongest assessment, as measured by Best's Capital Adequacy Ratio (BCAR). This provides the company with sufficient capital buffers to absorb the impact of adverse fluctuations in its operating environment. Eurasia has a low dependence on reinsurance and employs a conservative reserving approach that has led to reserve redundancies in recent years. Whilst the company has taken steps to improve the quality of its investment portfolio, its asset base remains heavily exposed to the high financial system risk in Kazakhstan, which is an offsetting rating factor.
In addition, AM Best notes the weaker credit profile of Eurasia's parent, Eurasian Financial Company JSC (EFC), primarily due to the parent's ownership of JSC Eurasian Bank. As a result, in AM Best's opinion, Eurasia derives low levels of financial flexibility and liquidity from its parent. Nonetheless, no rating drag has been applied to Eurasia's ratings from EFC, in view of regulatory restrictions in Kazakhstan that prohibit extraction of capital from a subsidiary to its detriment.
Eurasia's operating performance is assessed as strong, with the company reporting a five-year (2016-2020) weighted average combined ratio of 82.4% and a return-on-equity ratio of 20.2%, as calculated by AM Best. Whilst underwriting results have been subect to some volatility, the company has reported positive operating earnings in each of the past 10 years, supported by solid investment returns. Prospectively, AM Best expects the company's operating performance to remain strong as it executes its strategic plan whilst maintaining underwriting discipline.
Eurasia has a dominant role in the local (re)insurance market and benefits from geographic diversification through international inward reinsurance. It is the largest (re)insurance company in Kazakhstan, with a non-life market share of 29.8% based on 2020 gross written premiums (GWP). Its international reinsurance portfolio provides diversification and accounts for 36% of GWP at year-end 2020. This business primarily emanates from the United States, India and Europe, where the company maintains long-standing relationships with its cedants. However, Eurasia faces strong competition in its international markets from companies with more established profiles.
This press release relates to Credit Ratings that have been published on AM 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 AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best's Credit Ratings, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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