Press Release - JULY 14, 2017

A.M. Best Affirms Credit Ratings of Halyk-Life, Life Insurance Subsidiary Company of the Halyk Bank of Kazakhstan, JSC


CONTACTS:
 Valeria Ermakova
Senior Financial Analyst
+44 20 7397 0269
valeria.ermakova@ambest.com

Catherine Thomas
Senior Director, Analytics
+44 20 7397 0281
catherine.thomas@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

LONDON - JULY 14, 2017
A.M. Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of Halyk-Life, Life Insurance Subsidiary Company of the Halyk Bank of Kazakhstan, JSC (Halyk-Life) (Kazakhstan). The outlook of these Credit Ratings (ratings) remains negative. Halyk-Life is a wholly owned subsidiary of JSC Halyk Bank (Halyk Bank), a leading retail bank also domiciled in Kazakhstan.

The negative outlook continues to reflect A.M. Best’s concern regarding the declining level of Halyk-Life’s risk-adjusted capitalisation in recent years, driven by the company’s exposure to high levels of investment and credit risk and material premium growth. Following an improvement in 2015, due to significant foreign exchange gains, risk-adjusted capitalisation declined again in 2016 after dividend payments due to increased capital requirements to support the company’s underwriting and credit risk.

Halyk-Life remains heavily exposed to the workers’ compensation segment, which accounted for a third of its portfolio in 2016 (2015: 23%). Although A.M. Best expects regulatory changes introduced in 2015 to improve the profitability of workers’ compensation business for Kazakhstan’s insurers, it remains a high risk line of business due to the potential for large long-tail losses. Halyk-Life’s workers’ compensation portfolio is heavily concentrated, with the top five clients accounting for a third of premium volume. A.M. Best’s concern is exacerbated by the fact that Halyk-Life reinsures a material part of this business to local companies with vulnerable credit profiles.

Halyk-Life continues to report positive operating results and maintains a good competitive position as Kazakhstan’s largest life insurer. Additionally, the company benefits from its affiliation with a wider financial services group owned by Halyk Bank. A.M. Best notes that the company’s competitive standing is subject to change due to high competition in the market and the potential for sudden regulatory changes.

A.M. Best does not consider the vulnerable credit profile of Halyk-Life’s parent, Halyk Bank, to affect Halyk-Life’s financial strength due, in particular, to the regulations that restrict the extraction of capital from an insurer to its detriment. On 4 July 2017, Halyk Bank announced that it had completed the acquisition of 96.81% of ordinary shares of Joint Stock Company Kazkommertsbank. Over the coming months, A.M. Best will conduct discussions with Halyk-Life’s management to determine whether the acquisition will have any impact on the insurer’s business strategy.

This press release relates to Credit Ratings that have been published on A.M. 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 A.M. 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 A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

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