Best’s News & Research Service - December 07, 2022 03:06 PM (EST)
AM Best Affirms Credit Ratings of AzRe Reinsurance, OJSC
- December 07, 2022 03:06 PM (EST)
London //BestWire// - AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of AzRe Reinsurance, OJSC (AzRe) (Azerbaijan). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect AzRe’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and marginal enterprise risk management (ERM).
AzRe’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as good quality retrocession and a conservative investment portfolio by asset type. Offsetting factors include the vulnerable credit quality of the company’s bond portfolio and exposure to the high financial system risk in Azerbaijan. Although AzRe does not have a formal dividend policy, AM Best expects future earnings retention to support internal capital growth, which will allow the company to maintain its strongest level of risk-adjusted capitalisation.
AzRe has achieved strong operating results in recent years, as demonstrated by a five-year (2017–2021) weighted average return-on-equity of 20.8%. Total earnings are supported by strong investment returns, reflective of Azerbaijan’s high interest rate environment. The company benefits from relatively low loss ratios in Azerbaijan, which have supported a solid underwriting performance, as demonstrated by a five-year (2017-2021) average non-life combined ratio of 63.3% (as calculated by AM Best). However, prospective technical performance is subject to potential volatility due to exposure to large losses and the evolving operating environment in Azerbaijan.
AzRe is one of the leading players in the local (re)insurance market where it benefits from its profile as Azerbaijan’s only specialised reinsurer. The company’s business profile is constrained by geographical concentration and the small size of the portfolio by international standards. AM Best notes that AzRe has taken steps to grow its top line by targeting new reinsurance segments domestically and expanding in foreign markets, where it has the potential to benefit from increasing reinsurance premium rates. AM Best will continue to monitor the progress of the company’s expansion strategy.
This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.