AM Best Revises Issuer Credit Outlook to Stable for Nomad Insurance Company JSC
LONDON--(BUSINESS WIRE)--May 24, 2019--
AM Best has revised the outlook to stable from negative for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of C++ (Marginal) and the Long-Term ICR of “b+” of Nomad Insurance Company JSC (Nomad Insurance), the wholly owned subsidiary of Nomad Insurance Group Limited, a private non-operating company (both entities are domiciled in Kazakhstan). The outlook of the FSR remains stable.
The ratings reflect Nomad Insurance’s balance sheet strength, which AM Best categorises as adequate, as well as its adequate operating performance, limited business profile and weak enterprise risk management.
The revision of the Long-Term ICR outlook to stable from negative reflects AM Best’s expectation that Nomad Insurance’s risk-adjusted capitalisation will remain at a strong level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by positive operating results. The company’s risk-adjusted capitalisation deteriorated in 2016 and 2017 due to an increase in net underwriting leverage and significant dividend payments. AM Best had anticipated a further decline in 2018. Instead, BCAR scores improved to a strong level supported by an increase in retained earnings. An offsetting factor for balance sheet strength is the company’s elevated investment risk profile, due to the high financial system risk in Kazakhstan.
Nomad Insurance has a track record of positive, albeit volatile, operating performance, with a five-year average return on equity of 20.6% (2014–2018). Over this period, performance benefited from a relatively low level of loss activity and Kazakhstan’s high interest rate environment. The company’s technical results are pressured somewhat by high acquisition and management costs, but profits have been reported in four out of the past five years. AM Best does not expect the expense strain to ease in the near term due to Nomad Insurance’s high-cost distribution network and lack of scale. Prospective performance may be subject to volatility due to the challenging market conditions in Kazakhstan.
Nomad Insurance has an established business profile in Kazakhstan. Based on regulatory returns as of Jan. 1, 2019, Nomad Insurance ranked fourth out of 20 active non-life market participants in Kazakhstan, with gross written premium of KZT 18.3 billion, translating into an 8% market share. In 2018, the company lost its leading position in local motor third-party liability insurance and now ranks second within the segment. Going forward, the company aims to focus on profitability, rather than growing market share.
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 Understanding 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 rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.
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KEYWORD: UNITED KINGDOM UNITED STATES EUROPE ASIA PACIFIC NORTH AMERICA NEW JERSEY KAZAKHSTAN
INDUSTRY KEYWORD: PROFESSIONAL SERVICES FINANCE INSURANCE
SOURCE: AM Best
Copyright Business Wire 2019.
PUB: 05/24/2019 03:35 PM/DISC: 05/24/2019 03:35 PM