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The International Rating Agency S&P Global Ratings has revised its outlook on Kazakhstan-based Grain Insurance Co. JSC to developing from positive, the rating agency said.

At the same time, S&P affirmed its 'B' long-term counterparty credit and insurer financial strength ratings, as well as its 'kzBB+' national scale rating on the company.

“The outlook revision stems from the possibility that Grain Insurance's capital or performance may be affected by changes in the business fortune of its shareholder. In our base-case scenario, however, we expect the main rating factors will remain balanced over the next 12 months, and we continue to see positive developments in the company's enterprise risk management,” S&P said.

The rating affirmation reflects the view of the company's highly vulnerable business risk profile and weak financial risk profile.

S&P believes that Grain Insurance's weak competitive position, stemming from its very small size in terms of premium written, 1.6 billion Kazakhstani tenge (or $4.6 million) in 2016, and its predominant focus on the agricultural sector, are so far not affected. Grain Insurance's financial risk profile continues to be supported by capital adequacy that significantly exceeds the threshold for the 'AAA' level, as well as by overall positive view that the regulatory framework provides some protection against negative intervention from shareholders.

“We note, however, that given uncertainties with regards to the future business fortunes of Nurlan Tleubaev, and ongoing financial difficulties across his businesses, we cannot rule out direct or indirect effects on Grain Insurance,” S&P said.
The developing outlook on Grain Insurance indicates that S&P could affirm, raise, or lower its ratings on the company during the next 12 months.

A positive rating action would depend on Grain Insurance's financial and business risk profiles remaining immune to the ongoing financial difficulties of its shareholder, as well as on improvements in Grain Insurance's enterprise risk management, notably the tightening and further enhancement of risk management practices linked to catastrophe and accumulation risks.

S&P could take a negative rating action if it sees that Grain Insurance's financial or business risk profile is weakening as a result of its shareholder's ongoing financial difficulties. In particular, the rating agency could downgrade the company if it observes significant deterioration of capitalization or if it believes that its current niche competitive position is at risk.

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