TEXT-S&P rates Insurer Kazkommerts-Policy ‘B+/kzBBB’
— In our view, Kazakhstan-based insurer Kazkommerts-Policy displays
adequate operating results and capitalization, but its competitive
position—in international terms—and financial flexibility are weak.— We consider Kazkommerts-Policy to be a strategically important
subsidiary of Kazkommertsbank under our group methodology. However, our
assessment reflects the company’s stand-alone credit profile.— We are assigning our ‘B+’ credit ratings and ‘kzBBB’ Kazakhstan
national scale rating to Kazkommerts-Policy.— The stable outlook reflects our expectation that Kazkommerts-Policy
will be able to show sound operating results and maintain at least very strong
capital adequacy.Standard & Poor’s Ratings Services said today it assigned its ‘B+’ long-term
counterparty credit and insurer financial strength ratings and ‘kzBBB’
Kazakhstan national scale rating to JSC Insurance Co. Kazkommerts-Policy. The
outlook is stable.”The ratings reflect our view of Kazkommerts-Policy’s adequate operating
results and capitalization, supported by extremely strong risk-based capital
adequacy,” said Standard & Poor’s credit analyst Ekaterina Tolstova. “These
positive factors are offset by the company’s weak competitive position in
international terms and its limited financial flexibility.”Kazkommerts-Policy, a universal insurance company, was established in 1996.
The current shareholder structure was adopted in 2008 and the company’s
ultimate shareholder is Kazkommertsbank (JSC) (KKB; B/Stable/C). We
consider Kazkommerts-Policy to be a strategically important subsidiary of its
parent, KKB, based on our group methodology. However, our assessment of the
company’s stand-alone credit profile (SACP) is higher than our rating on KKB. We
believe the regulatory framework provides some protection for the company in the
event of adverse intervention from its parent. Consequently, the rating on
Kazkommerts-Policy reflects its SACP. Nevertheless, the rating cannot be more
than one notch higher than the rating on KKB.We assess Kazkommerts-Policy’s competitive position as weak overall,
constrained by a relatively small premiums base in international terms and
high industry and country risks in Kazakhstan.With gross premiums written (GPW) of Kazakhstani tenge (KZT) 16.4 billion
(about $110 million) in 2010, Kazkommerts-Policy is the second largest player
in Kazakhstan’s insurance market after Eurasia Insurance Co. (BB/Stable/—),
whose GPW was KZT18.8 billion (about $128 million). We note that the company’s
gross results are quite volatile, owing to civil liability fronting business.We consider the operating performance of Kazkommerts-Policy to be adequate
and supported by good underwriting and investment results. Although the gross
combined ratio was volatile, mainly because of fronting business, the net
combined ratio is quite stable. It was 81% in 2010 after 78% in 2009.Investment income has been stable, except during the financial market
turmoil in 2009. In our view, the quality and mix of Kazkommerts-Policy’s
investment portfolio are adequate. However, the portfolio is exposed to
significant credit risk, some market risks, and shows a concentration of Kazakh
issuers.We believe that Kazkommerts-Policy’s capitalization is generally adequate,
reflecting extremely strong risk-based capital adequacy. In our view, however,
there is some dependence on reinsurance protection, the quality of which we
consider to be adequate.We view Kazkommerts-Policy’s financial flexibility as weak, constrained by
its parent’s current financial profile. However, we regard the company’s
adequate internal capital generation as positive.”The outlook is stable because we expect that Kazkommerts-Policy will be
able to maintain its competitive standing in the Kazakh insurance market, while
showing sound operating results and keeping capital adequacy at least very
strong,” said Ms. Tolstova.We envisage that the net combined ratio will not exceed 90% in 2011-2012 and
that gross technical results will likely be volatile.A negative rating action could follow if we saw a significant deterioration
of the company’s competitive position and quality of reinsurance protection or
if operating results weakened, reflected in net combined ratios of more than
100%. If we were to perceive the ultimate shareholder’s actions as having a
negative influence on the company’s operating results or infringing the rights
of policyholders, we would also consider a negative rating action. In
addition, negative rating actions on the parent, KKB, could lead to similar
rating actions on Kazkommerts-Policy. In such a case, our rating on
Kazkommerts-Policy would likely be at most one notch higher than that on its
parent.Positive rating actions are unlikely at this stage, in view of the credit
profiles of Kazkommerts-Policy and KKB.RELATED CRITERIA AND RESEARCHAll articles listed below are available on RatingsDirect on the Global
Credit
Portal, unless otherwise stated.— , Jan. 20, 2011— Refined Methodology And Assumptions For Analyzing Insurer Capital
Adequacy Using The Risk-Based Insurance Capital Model, June 7, 2010— Use Of CreditWatch And Outlooks, Sept. 14, 2009— Interactive Ratings Methodology, April 22, 2009— Group Methodology, April 22, 2009— Evaluating Insurers’ Competitive Positions, April 22, 2009
Nikkei to slip from 6-week high on euro reality check
Wall Street shares fell on Monday after Germany said that a
summit of EU leaders next Sunday would not produce a miracle
cure for the euro zone’s sovereign debt crisis.”Although markets were not expecting the debt crisis to be
resolved overnight, shares prices are likely to succumb to
profit-taking after the rally,” said Hiroichi Nishi, equity
general manager at SMBC Nikko Securities.On Monday, the Nikkei added 1.5 percent to 8,879.60,
its highest finish since Sept. 2, while the broader Topix index
gained 1.8 percent to 761.88. Turnover for the Tokyo
Stock Exchange’s main board, however, was its lowest since late
December.Market players said the Nikkei was likely to trade between
8,700 and 8,850 on Tuesday.Nikkei futures in Chicago closed at 8,795, down 105
points from the Osaka close.Investors, who have scooped up exporters such as Sony
during the market’s rally in the past week, may shift
back to domestic-demand oriented firms, Nishi said.———————————MARKET SNAPSHOT @ 2252 GMT ——————INSTRUMENT LAST PCT CHG NET CHG
S&P 500 1200.86 -1.94% -23.720
USD/JPY 76.86 0.04% 0.030
10-YR US TSY YLD 2.155 — -0.096
SPOT GOLD 1671.46 0.03% 0.560
US CRUDE 86.27 -0.13% -0.110
DOW JONES 11397.00 -2.13% -247.49
——————————————————————————————-> Germany’s caution on debt plan sinks Wall St
> Euro sags as Germany undercuts hope on crisis plan
> Prices rise as Germany cools euro-zone hopes
> Gold falls with riskier assets on Europe worries
> Oil falls as Germany dampens hope for debt planSTOCKS TO WATCH— OlympusOlympus told investors on Monday that it may take legal
action against ousted Chief Executive Michael Woodford, accusing
him of disclosing confidential information in media interviews
where he discussed alleged improper M&A payments.— NTT DoCoMo IncNTT DoCoMo Inc will raise its smartphone sales
outlook for the current fiscal by more than 2 million units to
about 8 million as it gains from strong demand for the devices,
the Nikkei business daily said.— Tokyo ElectricTokyo Electric Power Co is looking to request
around 700 billion yen ($9.12 billion) in financial aid from a
government-backed institution set up to support nuclear disaster
compensation, the Nikkei said.— Honda , other Thai floods victimsHonda decided to cut production in Malaysia due to
disruption in parts supplies as its factory in Thailand suffered
from flooding, Nikkei reported on Tuesday.At least 300 Japanese companies have been affected by
flooding in Thailand and it could be months before all are fully
up and running again, the Japan External Trade Organisation’s
(JETRO) Thailand head said on Monday.
TEXT: Fitch Upgrades King’s Town Bank to ‘BBB-‘; Outlook Stable
King’s Town Bank’s (KTB) Long-Term Issuer Default Rating
(IDR) to ‘BBB-’ from ‘BB+’. A full rating breakdown is provided
at the end of this comment.The upgrade reflects KTB’s improved credit profile following
structural changes in 2006-2009 and enhanced performance from
its new business model. The bank cleaned up its asset portfolio,
implemented cost-saving measures, pursued more selective loan
acquisition and adopted a top-down approach to asset allocation,
resulting in increased profitability. The ratings also reflect
robust capitalisation, satisfactory liquidity and improved asset
quality.On the other hand, the ratings are constrained by KTB’s
small franchise, concentration risk and lack of operating scale.
The Stable Outlook underlines Fitch’s expectation that the bank
will maintain its credit profile. KTB has strong
profit-generating capability, although the agency expects it to
moderate as margins normalise. This is because Fitch believes
that high-return opportunities will attract competition. Fitch
also considers that the bank is sufficiently capitalized to
withstand increases in credit and impairment costs arising from
a global economic slowdown.Key credit risks are increased appetite for structured
financing, concentrated exposure to real estate and volatility
from foreign bond investments. However, the risks are moderated
by adequate structuring of its structured finance transactions
and sound credit quality of its overseas bond portfolio.
Nevertheless, Fitch considers it important for the bank to
maintain current level of capitalisation and remains cautious of
the bank’s ability in managing its structured lending and
overseas bond investment.Improved core earnings at KTB in 2010 and H111 were largely
attributed to increased net interest margin and reduced loan
loss provisioning. Margin expansion is supported by reduced
interest expenses following a change in deposit mix, increased
loan spread and enhanced investment yields. However, Fitch does
not expect the investment yields to be sustained given
increasingly uncertain global bond markets.KTB’s Tier 1 capital ratio was at 12.8% at end-H111,
characterized by disciplined earnings retention. Despite its
rather small franchise, the bank is largely deposit-funded with
customer deposits accounting for over 86% of total funding. Its
liquidity profile is adequate and stable, with a gross
loan-to-customer deposit ratio (LTD) between 71%-74% in
2009-H111.Further upgrade is unlikely as the bank is structurally
constrained by its small franchise in a competitive market.
Negative rating trigger is aggressive pursuit of asset yields or
asset growth, including mergers and acquisitions, leading to an
elevated risk profile or erosion of capitalization.KTB is a boutique regional bank with a network of 63
branches, of which 17 are in metropolitan areas and the
remaining 46 in rural areas in Taiwan. It had a 0.52% market
share of deposits at end-H111.A Credit Analysis on KTB will be available shortly on
www.fitchratings.com.The rating actions are as follows:KTB:Long-Term IDR: upgraded to ‘BBB-’ from ‘BB+’; Outlook StableShort-Term IDR: upgraded to ‘F3’from ‘B’National Long-Term rating: upgraded to ‘A(twn)’ from
‘A-(twn)’; Outlook Stable,National Short-Term rating: affirmed at ‘F1(twn)’,Individual Rating: affirmed at ‘C/D’Viability Rating: upgraded to ‘bbb-’ from ‘bb+’Support Rating: affirmed at ‘5’Support Rating Floor: affirmed at ‘No Floor’
UPDATE 3-China trade momentum softens in face of global woes
* Analysts say data allows China to ease appreciation trend
for yuan* Data shows China feels the pinch from economic woes in
Europe, U.S.By Koh Gui Qing and Aileen WangBEIJING, Oct 13 (Reuters) - China’s trade surplus narrowed
for a second straight month in September, as both imports and
exports were lower than expected, reflecting global economic
weakness and domestic cooling that will deepen policy quandaries
facing Beijing.The trade data on Thursday prompted the deputy chief of the
country’s customs administration to complain that a stronger
yuan was hurting exports. Slower import growth could also raise
pressure for fiscal loosening, despite inflationary pressures.”The rise in renminbi exchange rate may limit the room for
export growth,” Lu Peijun, the deputy head of the Chinese
customs administration, said at a news conference about the
data. The renminbi is another name for the yuan.”China is still facing relatively big imported inflationary
pressure and trade conditions are also deteriorating,” said Lu.China’s trade surplus of $14.5 billion in September was
smaller than August’s $17.8 billion and less than half of the
$31.5 billion recorded in July. Exports to the troubled European
Union fell to their lowest value since June.”It is now certain that external demand is falling. Chinese
export growth will continue to slow in the rest of the year,”
said Shi Lei, an analyst for Pingan Securities in Beijing, who
said the figures were unlikely to prompt swift policy shifts.”As falling external demand is expected by Chinese
policymakers, any broad-based loosening of the monetary policy
is unlikely in the short term until we see a clear fall in
inflation,” said Shi. “The window for possible policy easing is
around November and December.”Both imports and exports were weaker than forecast by
economists in a Reuters poll and several analysts said no
rebound is in sight.Exports rose 17.1 percent last month from a year ago,
slowing from a 24.5 percent gain in August, and imports rose
20.9 percent, compared with August’s 30.2 percent increase.Still, the value of China’s imports and exports are near
record highs.”The trade surplus is narrowing on a trend basis. I think
this shows that the Chinese economy is (in the midst) of
rebalancing,” Jian Chang, an economist for Barclays in Hong
Kong.”Going forward, the effect of weakening external demand will
slow export growth to mid- to lower teens. We expect import
growth to hold up better.”China could point to its reduced trade surplus as evidence
that it is moving to deal with economic imbalances that have
riled lawmakers in the United States, who point to U.S. trade
deficit as evidence that the yuan is drastically under-valued.The U.S. Senate approved a controversial bill on Tuesday
aimed at forcing Beijing to push the yuan higher against the
dollar, which supporters argue would reduce a U.S. trade deficit
with China of more than $250 billion.”The shrinking trade surplus and easing imported inflation
may reduce some pressure for Beijing to quicken the pace of yuan
appreciation,” said Du Zhengzheng, an analyst at China
Development Bank Securities in Beijing.”With exports growing at a slower-than-expected pace, I
think Beijing could slow down the pace of nudging up the yuan in
the coming months for fear of hitting its exports too much,
especially when the external demand is weakening.”But the main direction for Beijing’s yuan regime reform
would not be changed, which is to widen the trading band and
guide two-way movements.”In month-on-month terms, China’s exports rose in September
after calendar adjustment by 1.6 percent, versus a decline of
3.3 percent in August and a rise of 5.4 percent in July.China’s overall balance of trade with the United States,
however, remained unchanged in September from August; in both
months China recorded a $20.0 billion surplus.China’s trade surplus with the European Union was $12.9
billion in September, down from $14.8 billion in August.Although the fate of the U.S. currency bill is uncertain, it
has drawn sharp rebukes from Beijing. The central bank argued
that a stronger yuan would not on its own reduce the bilateral
trade imbalance nor save American jobs.”We should say that the narrowing trade surplus will reduce
the risks for a possible world trade war, although the passage
of the currency bill in Washington may actually blur the outlook
for China’s exports,” said Zhang Zhiwei, an economist with
Nomura Securities in Hong Kong.
B of A tries to burnish tarnished image with ads
* Consumer groups are not impressedBy Rick RothackerOct 11 (Reuters) - Bank of America Corp, under fire
for everything from improper foreclosures to hiking debit card
fees, is fighting back with advertising.The bank is running TV, print and online ads through the
end of the year in 12 larger markets, including Charlotte,
Boston, Chicago, New York and Los Angeles, as well as some
smaller communities, said bank spokesman T.J. Crawford.The ads describe the bank’s charitable donations and small
business loans, as well as its efforts to ease loan terms for
underwater mortgage borrowers, known as “loan modifications.”“The campaign aims to deliver the facts about Bank of
America’s local impact,” Crawford said. “Sharing the
significant work we do at the local level and critical role we
play is more important than ever.”Bank of America’s critics were not impressed.The ads are “irrelevant,” said Kathleen Day, spokeswoman
for the Center for Responsible Lending, a Durham, North
Carolina-based nonprofit that advocates for homeowners. “The
only thing that matters is that they and other banks clean up
their servicing operations so they can do more loan
modifications and never do the same thing to the economy
again.”Bank of America and other banks launched similar campaigns
when they faced criticism in 2009 for taking government bailout
dollars.Large banks have paid back that money but face continuing
outrage over their mishandling of foreclosure paperwork, new
fees they are charging consumers, and the continuing economic
fallout from the financial crisis.The “Occupy Wall Street” movement has spread from New York
to other cities around the country, including the bank’s
hometown of Charlotte, North Carolina.WORKING TO HELPThe nation’s largest bank by assets debuted the campaign
Sept. 26, days before it announced a new $5 per-month debit
card fee and experienced problems with its web site.An ad that ran Sunday in Charlotte carried the tagline:
“We’re working to help keep the North Carolina economy moving
forward.”It noted the bank’s contributions to the state, including
$159 million in loans to small businesses in the first half of
the year, more than 22,000 loan modifications since 2008 and
$10.8 million in charitable commitments this year.The bank does not disclose the cost of its advertising
campaigns, Crawford said. In the first half of this year, Bank
of America spent $1.1 billion on marketing, up from $982
million in the same period last year, according to its
second-quarter earnings report.Bank of America lost $7.4 billion for common shareholders
in the first half of the year, as it set aside money to cover
mortgage loses and legal settlements. It reports third-quarter
earnings on Oct. 18.
