The credit rating of Joint-Stock Company “ASKO-Center Insurance Company” (hereinafter, the Company) is based on its moderately strong business profile and financial profile and satisfactory quality of corporate governance. The high liquidity and capital adequacy assessments have a positive impact on the rating, along with sufficiently high operating indicators.
Joint-Stock Company “ASKO-Center Insurance Company” is a small regional company that was founded in 1991. The Company’s operations are focused on several regions of Russia’s Central Black Earth economic region. Although the Company does not hold a significant share of Russia’s insurance market, according to its 9M 2019 results, it is one of the five largest companies in the Kursk Region’s personal and property insurance market. The Company’s key areas of activity are vehicle insurance, voluntary medical insurance, and accident insurance, which accounted for 90% of its premiums for 9M 2019.
Key rating assessment factors
The moderately strong business profile of the Company stems from the combined assessment of the Company’s position in the insurance market and its operating indicators. The diversification of the Company’s sales channels and quality of its product line are assessed as average, while the diversification of the client base is below average. The significant concentration of the Company’s business in a single region influences the client base diversification assessment. The assessment of the quality of the product line stems from the limited range of products offered by the Company. At the same time, ACRA notes that the Company is able to meet its clients’ needs, including through additional insurance products provided by partners. The assessment of the Company’s market position is in-between “sustainable” and “weak” because on the one hand, its niche position in the regional market is stable, yet on the other hand, it faces risks related to the presence of major players in the market.
The moderately strong assessment of operating indicators is based on data from the Company’s business outlook. The combined ratio for 9M 2019 was 0.56. In the future it is expected to stay below 0.65, which points to the Company’s high operating efficiency. ACRA notes that over the past two years, the growth of insurance premiums has slowed, which is characteristic of the Company’s conservative approach to risk. In ACRA’s opinion, maintaining the underwriting policy and the high level of competition in the insurance market may result in the Company’s insurance premiums growing slower than the average market rate.
The moderately strong financial profile is based on the asset quality assessment. Capital adequacy and liquidity are assessed at a higher level and do not affect the final assessment of the financial profile.
The asset structure assessment is at the highest level because the Company invests in low-risk assets (the average-weighted risk index is at 1.7) and maintains a high capital to asset ratio (0.73). The final asset quality assessment (moderately strong) is due to the high concentration of assets (27% of the Company’s assets are held in a single bank and the 10 largest investments account for 89% of the total value of assets).
The ratio of available capital to capital at risk calculated in accordance with ACRA’s methodology is 3.2 as of September 30, 2019. When combined with the assessment of other indicators, the capital adequacy of the Company is determined as high.
The strong liquidity position is due to significant current and long-term liquidity ratios — 3.26 and 3.31, respectively.
The quality of management of the Company has been assessed as satisfactory taking into account the neutral scores received by all the components of this factor. The Company’s management has extensive experience, however ACRA has reduced the assessment of this component to neutral because of the high key employee risk that derives from the CEO of the Company.
Key assumptions
- Carrying out the business plan over the 12 to 18-month horizon in accordance with the management’s predictions;
- Maintaining asset management, underwriting, and capital adequacy support policies.
Potential outlook or rating change factors
The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
- Significant improvement of the Company’s market position and higher diversification of the client base;
A negative rating action may be prompted by:
- Lower operating efficiency;
- Significant deterioration of asset quality assessment.
Rating components
SCA: а-.
Adjustments: none.
Issue ratings
No outstanding issues have been rated.
Regulatory disclosure
The credit rating has been assigned under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Insurance Companies Under the National Scale for the Russian Federation, and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
A credit rating has been assigned to Joint-Stock Company “ASKO-Center Insurance Company” for the first time. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.
The credit rating is based on the data provided by Joint-Stock Company “ASKO-Center Insurance Company”, information from publicly available sources, and ACRA’s own databases. The rating analysis was conducted using the GAAP and IFRS financial statements of Joint-Stock Company “ASKO-Center Insurance Company”. The credit rating is solicited, and Joint-Stock Company “ASKO-Center Insurance Company” participated in its assignment.
No material discrepancies between the provided data and the data officially disclosed by Joint-Stock Company “ASKO-Center Insurance Company” in its financial statements have been discovered.
ACRA provided no additional services to Joint-Stock Company “ASKO-Center Insurance Company”. No conflicts of interest were discovered in the course of credit rating assignment.
