Fitch raised ratings of Insurance Company Amanat Insurance (Kazakhstan), Outlook "Stable"

/Fitch Ratings, London-Moscow, July 18, 12, Fitch Ratings English translation, KASE headline/ - Fitch Ratings has upgraded AMANAT Insurance (Kazakhstan)'s (AMANAT) Insurer Financial Strength (IFS) rating to 'B' from 'B-' and National IFS rating to 'BB(kaz)' from 'B+(kaz)' . The Outlooks are Stable. The rating upgrade reflects the removal of regulatory risk associated with statutory capital requirements in 2011, adequate, albeit volatile, risk- adjusted capitalisation and signs of improvement in underwriting performance in 5M12. Offsetting rating factors include the fact that AMANAT continues to face operational challenges due to the forced restructuring that commenced in 2009 following a change in ownership. Fitch however takes comfort from recent stability in the composition of the management board. The agency views negatively AMANAT's private ownership as the dividend withdrawal in Q212 raises some concerns over the company's capital management policy. The investment portfolio of AMANAT is of weak credit quality, with substantial holdings of sub-investment-grade debt, a common feature for the insurance market in Kazakhstan. The level of diversification is also low with a significant proportion of assets being concentrated in Kazakh banking groups. However, the liquidity profile of these investments is satisfactory. Fitch's calculated risk-adjusted capital adequacy indicates that AMANAT was well capitalised both at end-2011 and end-5M12. However, the agency notes that capitalisation was volatile in the course of 2011 and that additional capital injections may be necessary to support the growing business. Fitch also notes the relative improvement in the combined ratio, which, as assessed by Fitch, stood at 104.3% at end-5M12 versus 113.7% in 2011. This decrease has been driven by an improved loss ratio, which more than offset the deterioration in the expense ratio. This improvement could indicate that the adverse experience in 2011 was one-off in nature, although Fitch believes that additional evidence is needed before a definitive conclusion can be reached in this respect. The ratings could be upgraded if the new management team proves its credibility and effectively enhances AMANAT's franchise through profitable growth. Conversely, failure to enhance AMANAT's operating profile would be viewed negatively. A deterioration of AMANAT's solvency margin to a level below 100%, in the absence of financial support from the shareholder as well as a material decrease in the credit quality of AMANAT's investments could also result in a downgrade. Contacts: Primary Analyst, Dmitri Zalessky, Analyst +7 495 956 5570 Seconday Analyst, Federico Faccio, Senior Director +44 20 3530 1394 Committee Chairperson, Chris Waterman, managing Director +44 20 3530 1168 Media Relations: Julia Belskaya von Tell, Moscow, tel.: + 7 495 956 9908/9901, julia.belskayavontell@fitchratings.com [2012-07-19]