OREANDA-NEWS. April 09, 2012. Fitch Ratings has affirmed AMANAT Insurance (Kazakhstan)'s (AMANAT) Insurer Financial Strength (IFS) rating at 'B-' and National IFS rating at 'B+(kaz)' and revised the Outlooks to Stable from Negative, reported the press-centre of KASE. 

Revision of the Outlook to Stable reflects the removal of the regulatory risk after the completion of the capital increase in Q411 and strengthening of the regulatory solvency margin coverage to 140% at end-February 2012 from the only-marginally compliant levels during Q211-Q311. Based on the agency's own internal assessment, Fitch continues to view AMANAT's risk-adjusted capital as strong for the rating level.

AMANAT's sole shareholder injected KZT360m to remove the pressure on the insurer's regulatory capital position in Q411, one year later than it was initially scheduled. While this moderately improves Fitch's view of AMANAT's importance to the shareholder, the agency's expectations of future potential support in case of necessity continue to be low.

Fitch continues to be concerned over the trends in AMANAT's underwriting performance as the combined ratio deteriorated to 113% in 2011 from 85% in 2010 pressured by all components of the ratio, including loss, commission and expense levels. Fitch acknowledges that some of the drivers behind this deterioration were of a one-off nature, in particular, the changes in the reserving methodology, introduced by the regulator from 2011, which made a significant contribution to the increase in the loss ratio to 36% in 2011 from 18% in 2010.

At the same time, the agency continues to see growing imbalances in the composition of AMANAT's combined ratio with the expense ratio becoming overweighted at 53% in 2011 from the already high 47% in 2010. The increase in the commission ratio, although less influential on the combined ratio, also appears to be more of a systematic nature for the insurer and may potentially reflect the increased cost of business acquisition after a period of turbulence experienced in 2009-2011. Fitch believes that the expense levels are one of the major challenges for AMANAT's new management team appointed in Q411 and its target to restructure the portfolio and improve the underwriting result.

Key rating triggers for an upgrade include a substantial improvement in the underwriting performance along with the tightening of expense levels, the new management team proving its credibility and better demonstration of the shareholder's willingness to support the company.

Conversely, a continued weakness of AMANAT's underwriting performance and failure of the management team to achieve strengthening of the insurer's operating profile would be viewed as triggers for downgrade.

AMANAT is a medium-sized Kazakh non-life insurer with gross premiums written of KZT5.2bn in 2011 and gross assets of KZT4.9bn at end-2011.