OREANDA-NEWS. Fitch Ratings has affirmed Anadolu Anonim Turk Sigorta Sirketi's (Anadolu Sigorta) Insurer Financial Strength (IFS) rating at 'BBB-' and National IFS rating at 'AA+(tur)'. The Outlooks are Stable.

KEY RATING DRIVERS
The affirmation reflects Anadolu Sigorta's leading position in the Turkish non-life insurance market, adequate capitalisation, robust reinsurance protection and moderate profitability in a competitive local market.

The ratings are primarily constrained by the risks within the insurer's investment portfolio, in the form of significant exposure to the Turkish domestic banking system and sovereign (BBB-/Stable), through bank deposits and government bonds.

With a market share of 13.5% and TRY2.6bn of gross written premiums in 3Q15 (3Q14: TRY2.2bn), Anadolu Sigorta remains one of the major players in the Turkish non-life sector. Anadolu Sigorta has maintained its competitive position and market share following the inflow of foreign capital into the Turkish insurance sector, which resulted in increased competition and more aggressive underwriting strategies employed by some insurers.

Fitch views the insurer's capital position as 'Adequate', as measured by the agency's Prism FBM capital model. Capital adequacy is driven by significant premium volumes relative to shareholders funds and moderate asset risk. The capital position is protected by a prudent reinsurance programme. Anadolu Sigorta's regulatory solvency position also remains stable.

Anadolu Sigorta has maintained its moderate profitability with a net income of TRY43m in 3Q15 (3Q14: TRY52m). The reduction in the net income was driven by a higher Fitch-calculated loss ratio which increased to 85.4% in 3Q15 (2014: 79.7%), mainly as a result of reserve strengthening in the motor third party liability line. This was driven by a change in the reserving methodology across the entire non-life insurance sector.

Anadolu Sigorta's investment holdings could expose the company to significant losses if the financial environment in Turkey deteriorates. Turkey's financial system remains vulnerable to sharp interest rate movements, exchange rate volatility and political uncertainty. Exposure is currently manageable and profitability has been supported by strong and stable investment income.

RATING SENSITIVITIES
The ratings could be upgraded if the quality of Anadolu Sigorta's investment portfolio improves, which would be largely driven by an improvement in the credit quality of local banks and Turkey's sovereign credit rating.

A downgrade of Anadolu Sigorta's ratings could be triggered by a sovereign downgrade. The ratings could also be downgraded if the insurer's capital position deteriorates, as measured by a regulatory solvency ratio below 100% or a Fitch Prism factor-based model score of 'somewhat weak' following substantial underwriting or investment losses.