AM Best Affirms Credit Ratings of Victoria Insurance Company JSC

AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of Victoria Insurance Company JSC (Victoria) (Kazakhstan). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Victoria’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and weak enterprise risk management.

Victoria’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), and its relatively conservative and liquid investment portfolio. A track record of solid internal capital generation has resulted in the accumulation of a large capital buffer to absorb potential volatility associated with Victoria’s exposure to an accumulation of risks and its challenging operating environment. Offsetting factors in the balance sheet strength assessment include the exposure of the company’s asset base to high financial system risk in Kazakhstan and the absence of excess of loss reinsurance to protect against potential catastrophe losses. Victoria purchases reinsurance on a facultative basis with international reinsurers of high credit quality.

Victoria’s underwriting performance has been strong, as demonstrated by a five-year (2016-2020) weighted average combined ratio of 64.5% (as calculated by AM Best). However, technical results have been volatile due to a frequently changing underwriting strategy and low frequency, high severity claims in its liability lines of business. In 2020, Victoria reported overall pre-tax earnings of KZT 10.4 billion (approximately USD 24.8 million), compared with KZT 8.0 billion (approximately USD 21.0 million) in the previous year, supported by high investment returns, reflecting the high inflationary environment in Kazakhstan. AM Best expects Victoria’s operating performance to remain strong, albeit potentially volatile due to exposure to changes in the value of investments denominated in the U.S. dollar as a result of foreign currency exchange fluctuations.

Victoria has a limited business profile as a small non-life insurer operating solely in Kazakhstan’s fragmented and competitive insurance market. Based on 2020 gross written premium, it is ranked No. 13 among 19 non-life insurers with a market share of just 1.3%. In 2020, the company’s net written premium totaled KZT 3.7 billion (approximately USD 8.8 million), down 24% from the previous year. The reduction was partly due to the economic slowdown and its negative impact on the demand for commercial property and liability insurance, as well as actions taken by the company to reduce the size of its underperforming motor third-party liability portfolio.

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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

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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