Fitch Rating Confirms Insurance Company Kazakhmys at B+

The international rating agency Fitch Ratings has affirmed the financial strength rating (FSR) of the insurance company Kazakhmys at the level B+.


The rating reflects the strong capitalisation of Kazakhmys and its healthy profitability. During the first nine months of this year, a steady investment income and a positive underwriting result led to an increase in profits of up to 230 million tenge (US$680,340).

At the same time, the ratings take into account the lower average credit quality of the company’s investment portfolio, difficulties adhering to a growth strategy and high dependence on outward reinsurance.

Fitch also notes that because of Kazakhstan’s immature domestic capital market, Kazakhmys is exposed to risks. The investment strategy of the company is focused on bank deposits, which accounted for 79 percent of the investment portfolio at the end of last year. At the end of 2015, 58 percent of the investment portfolio was placed in local banks, mainly with ratings in the category B. Fitch believes improving the average credit quality of the investment portfolio is very important for the further successful development of the company.

The total rate of company’s annual net premiums grew 48 percent last year and 99 percent in the first nine months of this year. The growth was mainly driven by the compulsory civil liability insurance of vehicle owners, which increased to 68 percent of the portfolio based on net premiums for nine months of 2016, compared to 52 percent in 2015 (and 25 percent in 2014).

According to Fitch’s experts, the dependence of Kazakhmys on outside reinsurance is very high, and for the first nine months of this year the level of use of reinsurance was 90 percent, compared to 84 percent last year. Kazakhmys uses reinsurance primarily to protect large corporate contracts. The level of commissions on reinsurance that Kazakhmys receives via outgoing reinsurance is volatile.

The forecasts are stable. However, the ratings could be upgraded if Kazakhmys improves the average credit quality of its investment portfolio, or if the company implements its growth strategy, with a significant improvement in the profitability of insurance activities and enhancing portfolio diversification.

The ratings may be downgraded if Kazakhmys spends capital because of losses in its insurance business or investment losses, or shows a long-term inability to return to profitable insurance operations.

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