S&P Global Ratings, an international credit rating agency, has upgraded its outlook on Milli Reinsurans T.A.S. (Milli Re) to positive from stable, while reaffirming the company’s long-term issuer credit and insurer financial strength ratings at ‘B’, additionally, S&P raised Milli Re’s national scale rating in Turkiye from ‘trBBB+’ to ‘trA’.
S&P highlights that this growth has strengthened the company’s capital adequacy, supported by retrocession arrangements with highly rated international reinsurers that help mitigate its exposure to natural catastrophes.
The company expects Milli Re’s capital adequacy to remain above 99.5% through 2027 under its risk-based capital models.
S&P notes that Milli Re’s net combined ratio, a key measure of underwriting performance, improved to 115% in 2024 from 135% in 2023, reflecting enhanced operational results despite historically volatile conditions caused by high inflation and Turkish lira depreciation.
While combined ratios above 100% indicate underwriting losses, S&P emphasises that these losses are offset by robust investment income driven by favourable interest rates and the revaluation of invested assets, enabling the company to report positive net income consistently over the past five years.
S&P also points to potential risks, including Milli Re’s heavy concentration of investments in Turkish financial institutions, many of which are speculative grade, as well as exposure to foreign exchange volatility.
Despite these factors, S&P considers Milli Re to be moderately strategically important to its parent, IsBank, which holds an 87.6% stake and is assessed to have the capacity to provide financial support if required. Nevertheless, S&P’s rating on Milli Re remains based on its standalone credit profile of ‘b’.
The agency explained that the positive outlook reflects expectations that Milli Re will continue to strengthen both its competitive position and capital adequacy over the next two years.
S&P indicated that the outlook could return to stable if the company’s capital, earnings, or market position weaken significantly, or if IsBank’s creditworthiness or strategic support diminishes. Conversely, ratings could be raised further if improvements are observed in capital adequacy, competitive standing, or in IsBank’s ability to provide support.
S&P Global Ratings has consistently monitored Milli Re’s performance and maintains that its risk exposure remains high but manageable under current structures.
The reaffirmed ratings and upgraded national scale rating underscore the agency’s confidence in the company’s financial resilience and strategic positioning within Turkiye’s insurance market.
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