OREANDA-NEWS. Fitch Ratings has assigned Anadolu Anonim Turk Sigorta Sirketi (Anadolu Sigorta) an Insurer Financial Strength (IFS) rating of 'BBB-' and National IFS rating of 'AA+(tur)'. The Outlooks are Stable.

KEY RATING DRIVERS
The ratings reflect Anadolu Sigorta's leading position in the Turkish non-life insurance market, adequate capital position, robust reinsurance protection and moderate profitability within the competitive local market.

The primary offsetting factor and rating constraint is the notable risk within the insurer's investment portfolio, in the form of material exposure to the domestic banking system and the Turkish sovereign (BBB-/Stable), through bank deposits and government bonds.

Anadolu Sigorta is a major player in the Turkish non-life insurance sector with a market share of 13.2% and TRY3bn of gross written premiums. In premiums terms it is the third-largest non-life insurer in Turkey. Anadolu Sigorta has maintained its competitive position and market share following the inflow of foreign capital into the Turkish insurance sector, which resulted in increased competition and more aggressive underwriting strategies employed by some insurers.

Based on Fitch's internal capital assessment, Anadolu Sigorta's capitalisation level is 'adequate' and commensurate with the rating, reflecting large business volumes relative to shareholders' equity and moderate asset risk. The insurer's capital position is supported by the prudent reinsurance programme calibrated to protect the company from a 1 in 1000 year catastrophic loss event. The regulatory solvency position has been stable over recent years.

Anadolu Sigorta maintained its moderate profitability in 2014 and reported net income of TRY71.6m. (2013: TRY67.5m). The Fitch-calculated combined ratio was 101.5% in 2014 (2013: 97.7%) and the five-year average combined ratio was at 102.6%. Fitch notes that despite its leading position in many lines, Anadolu Sigorta has been unable to produce an underwriting profit.

The insurer's investment holdings could potentially expose the company to significant losses if the financial environment in Turkey were to deteriorate. Turkey's financial system remains vulnerable to sharp interest rate movements, exchange rate volatility and political uncertainty. Exposure is currently viewed as manageable and the agency notes that profitability has been supported by strong and stable investment income.

RATING SENSITIVITIES
The ratings could be upgraded if the quality of its investment portfolio improves, which would be largely driven by an improvement in the credit quality of the local banks and Turkey's sovereign credit rating.

A downgrade of Anadolu Sigorta's ratings could be triggered by a sovereign downgrade. The ratings could also be downgraded if the insurer's capital position deteriorates, as measured by regulatory solvency ratio below 100% or a Fitch Prism factor-based model score of 'somewhat weak' following substantial underwriting or investment losses.