S and P Global Ratings international agency revised its outlook on Kazakhstan-based Eurasia Insurance Co. to stable from positive, according to the message of the ratings agency.
At the same time, the agency affirmed the ‘BB+’ long-term counterparty credit and financial strength ratings on the insurer, as well as the ‘kzAA-‘ Kazakhstan national scale rating.
“The outlook revision balances Eurasia Insurance’s positive track record in improving the credit quality of its investment portfolio with volatile results and growing industry and country risks,” the message said.
In view of S and P analysts, insurance companies in Kazakhstan will likely face further challenges in 2016, owing to the constrained economic prospects in Kazakhstan, GDP stagnation, a sharp devaluation of the Kazakh tenge in 2015 and appreciation in 2016, and increased risks related to Kazakhstan’s banking sector.
Eurasia Insurance’s financial risk profile continues to be supported by solid capitalization, including extremely strong risk-based capital adequacy, and bottom-line operating performance over the past several years, according to the message.
S and P continues to view Eurasia Insurance’s competitive position as adequate, owing to its diverse portfolio of risks and leading positions in Kazakhstan, especially in inward reinsurance.
The ratings agency would upgrade Eurasia Insurance if it observed an improvement in its credit quality to the agency’s ‘BBB-‘ category or higher. Such a sustained improvement would likely trigger an upgrade, but no more than one notch from the current rating level.
However, such an upgrade would hinge on no further increase in the country and industry risk and or deterioration in the creditworthiness of Kazakhstan, according to the message.
A negative rating action could occur if the ratings agency believes that the deterioration in insurance technical results it observed last year would continue, even with stabilization of the tenge exchange rate.