22 December 2016 Insurance

AzInsurance downgraded as combined ratio soars to 116%

AzInsurance OJSC has had its Insurer Financial Strength (IFS) rating downgraded to 'B' from 'B+' by Fitch Ratings. The outlook is now stable.

Fitch said the downgrade reflects AzInsurance's weakened business profile and Fitch's expectations that this will not recover significantly in 2017. It also reflects the company's sharply lower operating profitability in the first nine months of 2016 continuing high investment risk.

The rating also takes into account the company's practice of very high profit distributions to the shareholder, Fitch said.

In the first nine months of 2016, AzInsurance's total gross written premiums (GWP) decreased by 34 percent compared with the same period a year earlier in the context of the worsened macroeconomic environment in Azerbaijan. The company faced a double-digit contraction in GWP in the most profitable line in its portfolio, cargo, with the share of cargo insurance plummeting to 4 percent of the portfolio from 28 percent a year earlier.

Fitch also noted that AzInsurance's underwriting result worsened to a loss of AZN1.9 billion in 9M16 from a profit of AZN10 billion in 9M15, with the combined ratio increasing sharply to 116 percent from 59 percent in 9M15.

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