AM Best Revises Outlooks to Stable for Halyk Insurance Company JSC
Underwriting results improved marginally in 2020, with the company reporting a combined ratio of 96.1% compared with 97.9% in 2019 (as calculated by AM Best).
AM Best has revised outlooks to stable from negative and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of the Joint-Stock Company Subsidiary of Halyk Bank of Kazakhstan Halyk Insurance Company (Halyk Insurance) (Kazakhstan).
These Credit Ratings (ratings) reflect Halyk Insurance’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and marginal enterprise risk management.
The revision of the outlooks to stable indicates the enhanced resilience of the company’s balance sheet as well as management actions taken to remediate under-performing compulsory motor third-party liability (MTPL) policies, supported by improved risk selection and underwriting discipline.
Halyk Insurance’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 investment portfolio with good liquidity. Internal capital generation is supported by a revised dividend policy that limits annual dividend distribution to a maximum of 50% of prior-year earnings. Offsetting factors include the company’s dependence on reinsurance and its material exposure to the high financial system risk in Kazakhstan.
Underwriting results improved marginally in 2020, with the company reporting a combined ratio of 96.1% compared with 97.9% in 2019 (as calculated by AM Best). Results in 2020 were positively impacted by lower loss ratios for the MTPL portfolio driven by pandemic lockdowns. Overall profitability has been strong, demonstrated by a five-year (2016-2020) weighted average return on capital of 14.0%, although this is partly the result of high investment returns, given Kazakhstan’s relatively high inflationary environment in recent years. Halyk Insurance is one of the leaders in its domestic non-life insurance market, ranking second as measured by gross written premiums in 2021.
AM Best does not consider Halyk Insurance’s financial strength to be affected by the weaker credit profile of its parent, Halyk Savings Bank of Kazakhstan JSC (Halyk Bank). This reflects AM Best’s consideration of the regulatory protection that restricts extraction of capital from the insurer to its detriment.
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