Fitch Rates Amanat Insurance (Kazakhstan), Outlook Stable

/Fitch Ratings, Moscow, October 18, 10, KASE headline/ - Fitch Ratings has assigned Kazakhstan-based Amanat Insurance (Amanat) a 'B' Insurer Financial Strength (IFS) rating and a National IFS 'BB(kaz)' rating. The Outlooks are 'Stable'. The ratings take into account the operational challenges faced by Amanat due to the forced restructuring commenced in 2009 and also caused by the unfavourable environment in the Kazakh insurance sector. On the other hand, the ratings reflect the insurer's strong risk-adjusted capital position, largely driven by a dramatic decline of net premiums written in 2009 and expected to be further supported by a capital injection in Q410. Exit of the minority shareholder and full change in the management team in Q109 resulted in 68% decline of Amanat's gross written premium (GWP) in 2009. The reason behind this was significant dependence of the franchise base on the company's CEO, nominated by the exited minority shareholder. The combined ratio rose far above 100%, largely driven by the expense ratio and delayed payment of the reinsurance costs for the portfolio written in 2008. However, Amanat's return on adjusted equity remained positive in 2009, supported by investment income. The majority shareholder, which used to have little involvement in the insurer's operations, declared its interest in the insurance business in 2009, nominated a new team and announced significant capital increase to be completed in 2010 to help the company meet new regulatory capital requirements. The portfolio started to recover in 2010, with GWP growth reaching 67% in 8M10. Amanat remains exposed to the challenges of the operating environment in the Kazakh insurance sector. Its main features are distribution of business largely through captive channels and affiliation of leading insurers with banking and industrial groups. The local insurance sector has suffered from the price softening during the global financial crisis like many other local insurance sectors worldwide. Amanat has no specific competitive advantages, which could help it to reduce the exposure to the challenges of the operating environment. The insurer's investment portfolio largely consists of fixed-income instruments, but has some significant industry concentrations. The credit quality is mixed with approximately half of the portfolio held in instruments with investment-grade ratings, and the other half in the low range of the speculative grade. A partially offsetting factor is that almost all instruments are marketable. Amanat is a non-life insurance company, headquartered in Almaty, Kazakhstan. It wrote KZT2.8bn of GWP in 2009 and had gross assets of KZT3.6bn at FYE09. Contacts: Primary Analyst, Anastasia Litvinova, Director +7 495 956 7082 Secondary Analyst, Maria Galkina, Analyst +7 495 956 5570 Committee Chairperson, Chris Waterman, Managing Director +44 20 7417 6328 Contacts for press: Anna Bykova, Moscow, tel.: + 7 495 956 9903/9901, anna.bykova@fitchratings.com [2010-10-18]