Concurrently, A.M. Best has withdrawn the ratings as the company has requested to no longer participate in A.M. Best's interactive rating process.
The ratings reflect Standard's balance sheet strength, which A.M. Best categorizes as strong, as well as its marginal operating performance, very limited business profile and weak enterprise risk management.
Standard's balance sheet strength is underpinned by its risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio, being at the strongest level. The company's risk-adjusted capitalization improved in 2017, due to a reduction in underwriting risk following the non-renewal of a significant part of the insurance portfolio of Alliance Policy Insurance Company JSC, which was absorbed by the company in the previous year. Factors that negatively affect the balance sheet strength assessment are the company's weak financial flexibility, questions over its ability to manage its catastrophe exposure, as well as its elevated investment risk profile, due to the high financial system risk in Kazakhstan. As at May 1, 2018, the company's regulatory solvency margin reached 1.89 (compared with a minimum requirement of 1.00).
Standard's performance has been volatile, with its return on equity ranging between -3.1% and 20.4% over the 2013-2017 period. Technical performance is weak, with losses reported in each of the past six years, apart from 2016. The company has a five-year weighted average combined ratio of 106.9% (2013-2017). In 2017, the company reported a combined ratio of 107.9% (2016: 94.3%), with performance impacted by the reduction in premium income and a high level of expenses.
Standard ranked as the 11th largest among Kazakhstan's 25 non-life insurers in 2017 with a 3% market share. The company's top line has fluctuated in recent years, as a 93.8% increase in gross written premium for 2016 was followed by a decline of approximately 23% in 2017, due to the non-renewal of a material part of the recently absorbed business and a number of large fronted contracts. A.M. Best expects a further decline in 2018. The company's underwriting portfolio is concentrated, with approximately 60% of its net written premium in 2017 derived from compulsory motor third-party liability (MTPL) business. A.M. Best expects the company's relatively small size and limited diversification to limit its ability to defend its market position in challenging conditions.
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