LIFE, OH LIFE

Kazakhstan 2014 | FINANCE | REVIEW: INSURANCE

Local companies have led a life coverage transformation in Kazakhstan's insurance sector over recent years, bringing about solid growth prospects.

There are 34 insurance and reinsurance organizations plying their trade in the Kazakhstani market, including seven with licenses for life insurance. On top of that, there are 12 insurance brokerages and 71 actuaries. Between 2008 and 2012, steady GDP growth afforded the insurance segment a CAGR of 11.3%, a solid figure framed by a CAGR of 76% in the life segment, an area that has been dominated by the general annuity category. The non-life segment, which accounted for 58.7% of total written premiums at end-2012, grew at a CAGR of just 1.2% over the same period.

In 2013, insurers in Kazakhstan earned KZT153.73 billion ($1.05 billion) in premiums, up a whopping 19.6% on the previous year. Moving into 2014, industry insiders are predicting growth in premium collection of between 15% and 20% for the full year. Growth will likely be driven by expansion in a batch of compulsory categories, including property and medical insurance and automotive insurance, which could account for up to 50% of growth over the year. However, the 18.9% devaluation of the tenge in early 2014 could result in higher value automotive and health insurance claims due to the higher cost of importing spare parts and medical supplies. In 2013, insurance companies forked out KZT52 billion under direct insurance agreements, down 23.6% on 2012. As for the breakdown, mandatory insurance payments totaled KZT20 billion, up 23.7%, voluntary private insurance payments totaled KZT22.8 billion, down 42.9%, and voluntary property insurance payments totaled KZT9.2 billion, down 23%.

The total assets of insurance firms, according to Interfax-Kazakhstan, stood at KZT523.4 billion at end-2013, an increase of 18.2% YoY. Over the same period, total equity rose by 6.2% to KZT254.6 billion, while premium reserves were clocked at KZT240.3 billion.

Of the over 30 insurance firms in the market, the top five represent 60% of collected insurance premiums as of January 1, 2014. Number one is Eurasia Insurance Company, with 27.1%, followed by Kazakhinstrakh, on 12%, followed in order by Kaspi Insurance, Kazkommerts-Policy, and BTA Insurance.

EURASIA INSURANCE COMPANY

Leading the sector with a 27.1% market share, Eurasia Insurance Company opened its doors in 1995. The firm covers a range of non-life insurance classes in both the voluntary and compulsory categories. The firm also reinsures risks across 150 countries worldwide, and boasts a portfolio free from large housing projects and banking loans, which it sees as risky. The insurer's premium income was KZT27.24 billion in 2013, while payments on claims totaled KZT12 billion and retained earnings came in at KZT4 billion. The firm has a BB+ rating with a stable outlook from Standard & Poor's.

KAZAKHINSTRAKH

Kazakhinstrakh is the insurance subsidiary of Halyk Bank, and boasts a 12% market share. The firm has a strong presence in the non-life area, and, in 2013, posted gross written premiums of KZT24 billion, up 38% thanks to the renewal of a large offshore oil-fronting contract. The company benefits greatly from Halyk Bank's large distribution network, although its greatest weakness is its high exposure to sub investment-grade securities, which account for 76% of its fixed income portfolio according to A.M. Best, which has affirmed Kazakhinstrakh's financial strength rating at B++ with an issuer credit rating of bbb, both stable.

ROUNDING OFF THE TOP FIVE

Kaspi Insurance had KZT22.7 billion in gross direct written insurance premiums at end-2012, and made a net profit of KZT9.7 billion, up KZT7.4 billion on the previous year. It is the third-placed insurer in terms of market share. The company was established 14 years ago and offers the full range of individual and corporate products in the non-life category.

In fourth place in terms of market share is Kazkommerts-Policy, with a similar offering of insurance products. Established in 1996, the company is owned by Kazkommertsbank and, as of July 2013, had a portfolio 74% dominated by voluntary property insurance, followed by compulsory insurance (15%) and voluntary personal insurance (11%). In the 12 months to end-July 2013, gross premiums came in at KZT1.9 billion, up from KZT1.8 billion in the previous 12 months.

Wrapping up the top five is BTA Insurance, which has some growth ambitions of its own. “We plan to increase our share at the market up to 5.6 %," Chairman Galym T. Amerkhojayev told TBY. The company also boasts an A rating from Expert RA Kazakhstan.

Kazakhstan's growing middle class and increasing disposable incomes—per capita GDP hit $13,000 in 2013, while private consumption was also up 16.1%—are one factor behind the consistent YoY growth in the insurance industry. A host of robust local firms, however, have also had a large role to play in overcoming the barriers usually associated with a lack of penetration, especially in the life area. Now resembling a GCC market instead of a former Soviet state in terms of insurance pickup, Kazakhstan's insurers have a lot to be thankful for. With premium growth set to expand by as much as 20% over 2014, individuals and corporates have never been so well insured.