AM Best has removed from under review with developing implications and affirmed the Financial Strength Rating of B- (Fair) and the Long-Term Issuer Credit Rating of “bb-” (Fair) of Kommesk-Omir Life Insurance Company JSC (Kommesk Life) (Kazakhstan). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Kommesk Life’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, very limited business profile and marginal enterprise risk management.
The ratings further reflect the decision of Kommesk Life’s shareholders and board of directors to alter its strategy and operate solely as a specialist life insurer going forward. The company has transferred out the non-life insurance portfolio to an affiliate and will assume the business of its existing life insurance subsidiary, Life Insurance Company Centras Kommesk Life JSC (Centras Kommesk Life), in order to execute its plan to scale up the existing life portfolio of the group.
Kommesk Life’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which is projected to be at the very strong level, as measured by the Best’s Capital Adequacy Ratio (BCAR). AM Best expects Kommesk Life’s risk-adjusted capitalisation to be supported by positive operating results in the medium term and the absence of dividend payments as the company executes its business plan. In addition, Kommesk Life’s balance sheet strength assessment considers its limited reliance on reinsurance. Offsetting factors include the relatively low credit quality of Kommesk Life’s investment portfolio, which is concentrated in its domestic market and has sizeable exposure to equities, in addition to the company’s exposure to the high levels of economic, political and financial system risks associated with operating in Kazakhstan.
The adequate operating performance assessment considers Kommesk Life’s five-year business plan. AM Best expects Kommesk Life to maintain positive technical return metrics over the underwriting cycle, notwithstanding the execution risk associated with its planned scale up.
Kommesk Life is a small insurer operating solely in the competitive Kazakh market. The company has been operating in the life segment through Centras Kommesk Life, which was established in 2019 and underwrites traditional life products, pension annuities and workers’ compensation insurance. The very limited assessment of the business profile reflects Kommesk Life’s portfolio, which albeit projected to grow, has a small size by domestic and international standards. The execution and market acceptance risk associated with Kommesk Life’s plan to materially scale up its current operations in the life segment are partially mitigated by the presence of an experienced and stable management.
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Todor Kitin, ACA
Senior Financial Analyst
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