AM Best


A.M. Best Assigns Credit Ratings to PASHA Insurance OJSC


CONTACTS:

Valeria Ermakova
Senior Financial Analyst
+44 20 7397 0269
valeria.ermakova@ambest.com

Catherine Thomas
Senior Director, Analytics
+44 20 7397 0281
catherine.thomas@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

LONDON - JANUARY 17, 2017 10:02 AM (EST)
A.M. Best has assigned a Financial Strength Rating of B+ (Good) and a Long-Term Issuer Credit Rating of “bbb-” to PASHA Insurance OJSC (PASHA Insurance) (Azerbaijan). The outlook assigned to these Credit Ratings (ratings) is stable. PASHA Insurance is a wholly owned subsidiary of PASHA Holding LLC, a diversified group also based in Azerbaijan.

The ratings reflect PASHA Insurance’s strong operating performance, supportive level of risk-adjusted capitalisation and solid business profile in its domestic market. The ratings also consider PASHA Insurance’s exposure to the heightened country risk in Azerbaijan and a material concentration risk in its underwriting portfolio.

PASHA Insurance’s operating performance is strong, as demonstrated by a five-year weighted average combined ratio of 89% and a return on capital and surplus of 15.3% (2011-2015). Performance has benefited from a relatively low level of loss activity in Azerbaijan compared to more mature insurance markets, in addition to the country’s high interest rate environment. Additionally, PASHA Insurance has recorded significant foreign exchange gains following the depreciation of the Azeri manat in 2015 and 2016. In non-audited financial statements for the 10 months to October 2016, the company reported a strong net profit of AZN 14.2 million (approximately USD 8.1 million) (full year 2015: AZN 17.4 million; approximately USD 9.9 million). However, prospective performance is likely to be negatively affected by the deteriorating economic conditions in Azerbaijan and the company’s plans to expand into market segments where it has limited expertise.

A.M. Best expects PASHA Insurance’s risk-adjusted capitalisation to be maintained at a supportive level for its ratings in the medium term, underpinned by its relatively large and under-utilised capital base and good quality reinsurance protection. Factors that negatively affect PASHA Insurance’s balance sheet strength are the company’s high dividend policy and its weak investment risk profile, given the high financial system risk in Azerbaijan. PASHA Insurance recognises its asset risk exposure and is taking steps to address this by revising its investment guidelines and exploring investment opportunities abroad. A.M. Best will continue to monitor the company’s investment risk profile and its asset and liability management.

PASHA Insurance maintains a solid business profile in Azerbaijan, supported by its affiliation with the PASHA group and established relationships with large commercial customers. At October 2016, PASHA Insurance was ranked as the country’s largest insurer based on gross written premiums (GWP). The company’s portfolio has grown substantially in recent years with a five-year compound annual growth rate of GWP of 26% (2011-2015). This trend continued into 2016, as the company expanded its motor, property and medical books. Nonetheless, A.M. Best notes a material concentration risk in PASHA Insurance’s underwriting portfolio, with approximately half of its portfolio derived from medical insurance business. Whilst PASHA Insurance is expected to continue to focus on corporate business, its strategic plans incorporate the development of its retail book and leveraging opportunities with other PASHA group companies.

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.

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AMB# Company Name
095015 PASHA Insurance OJSC