A.M. Best has placed under review with negative implications the financial strength rating of B- (Fair) and the issuer credit rating of “bb-” of Standard Insurance Company, JSC (Standard) (Kazakhstan).

The rating action follows the announcement on 21 January 2016 of Standard’s intention to acquire the insurance portfolio of Alliance Polis Insurance Company, JSC (Alliance Polis) (Kazakhstan). Alliance Polis is a non-life company operating in the Kazakhstan market. A.M. Best understands that an unspecified quantity of Alliance Polis’ insurance portfolio will be transferred to Standard, subject to receiving policyholders’ consent. A.M. Best is currently in the process of reviewing the impact of this transaction on the rating fundamentals of Standard, as it gathers the necessary information available to support the review.

Based on regulatory statistics for the year to November 2015, Alliance Polis maintains a 2.4% market share with gross written premiums (GWP) of KZT 6.2 billion (approximately USD 16.3 million) compared with GWP of KZT 4.2 billion (approximately USD 11 million, 1.6% market share) for Standard in the same period. Both companies have generated technical losses over the past several years as a result of a combination of factors, including high expense pressures due to their limited scale. Additionally, A.M. Best notes the significant volatility inherent within Alliance Polis’ historical performance, with loss ratios ranging between 39% and 154% in the latest five-year period (2011-2015).

Given the material size of Alliance Polis’ insurance portfolio relative to that of Standard, as well as both companies’ performance issues, there is uncertainty regarding the adequacy of Standard’s risk-adjusted capitalisation following the completion of the transaction.

The ratings of Standard will remain under review for up to six months while A.M. Best collates the necessary information required to assess the impact of the transaction on the company’s rating fundamentals, including the effect on risk-adjusted capitalisation, prospective earnings and business strategy. Based on information currently available, A.M. Best believes that there is a reasonable likelihood that the ratings of Standard will be lowered as a result of this transaction.

This press release relates to rating(s) 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.

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