Fitch downgrades Insurance Company Amanat Insurance (Kazakhstan) ratings, outlook Negative
24.06.11 15:14
/Fitch Ratings, Moscow, June 23, 11, heading by KASE/ - Fitch Ratings has
downgraded AMANAT Insurance's (AMANAT) Insurer Financial Strength (IFS) Rating
to 'B-' from 'B' and National IFS Rating to 'B+(kaz)' from 'BB(kaz)'. The
Outlook is Negative.
The downgrade reflects the weakening of AMANAT's regulatory capital position
to marginal levels and the significant delay in completing the announced capital
increase by KZT360m. The rating action also takes into account the deterioration
of the insurer's underwriting performance in 2011. The ratings are supported by
the insurer's risk-adjusted capital position commensurate with the rating level
and its relatively good liquidity position.
If any non-compliance by the insurer with regulatory prudential requirements
were followed by external regulatory intervention, Fitch would view these events
as a key trigger for a downgrade. Alternatively, reduction of the regulatory
risk and signs of the improving underwriting performance could result in
positive rating actions.
AMANAT was close to the minimum required level of solvency margin of 100% at
end-4M11 and end-5M11 due to pressure on available and required capital, both
components of the solvency ratio. AMANAT's required capital grew in 2011 because
the regulator increased the minimum guarantee fund, a fixed sum. Pressure on
available capital was triggered by changes in the reserving methodology by the
regulator which came into force in 2011.
AMANAT expected its shareholder to inject an additional KZT360m in Q410 to
support the company's regulatory capital position. The injection has not,
however, been completed due to the long drawn out transfer of the ownership of
the insurer from the technical holding vehicles directly to the beneficiary
shareholder. The formalities related to the ownership were completed by April
2011, but the shareholder has delayed the capital increase to end-2011.
The deterioration of the insurer's underwriting performance to date in 2011 was
caused by increased allocations to loss reserves which at end-Q111 strengthened
by a net 83%, with 78% represented by an increase in the incurred but not
reported loss reserve. In Q211, AMANAT's technical result was adversely affected
by larger losses in a number of business lines. Fitch is concerned about the
sustainability of AMANAT's negative operating cash flow, which was explained by
the restructuring of the portfolio in 2009-H110, but now appears to signal that
underwriting activity is recovering more slowly than had been expected. At the
same time, Fitch notes that the insurer still has a relatively good liquidity
position with net technical reserves covered by relatively liquid, local
investment assets.
AMANAT is a medium-sized Kazakh non-life insurer with gross premiums written
of KZT5bn in FY10 and gross assets of KZT4bn at end-2010. The performance
of the insurer was adversely affected by changes in the ownership structure and
management team in Q109.
Contacts:
Primary analyst, Anastasia Litvinova, Director +7 495 956 7082
Secondary analyst, David Prauss, Senior Director +44 20 3530 1250
Committee Chairman, Federico Faccio, Senior Director +44 20 3530 1394
Media contacts:
Anna Bykova, Moscow, tel. :+ 7 495 956 9903/9901,
anna.bykova@fitchratings.com
[2011-06-24]